Motilal Oswal Financial Services

Initiating Coverage |Lemon Tree Hotels

Sector: Hospitality

BSE Sensex

38,565

S&P CNX

11,576

Lemon Tree Hotels

CMP: INR74

TP: INR90 (+21%)

Buy

Lemon Tree Hotels (LEMONTRE) is the largest hotel chain operator in the mid-priced

hotel segment in India. It manages 5,342 rooms across India through its three brands:

(i) Lemon Tree Premier (LTP) – catering to the upper-midscale segment, (ii) Lemon

Tree Hotels (LTH) – for the midscale segment, and (iii) the Red Fox Hotel (RFH) -

targeted towards the economy segment.

Stock Info

Bloomberg

Equity Shares (m)

MCap.(INR b)/(USD b)

52-Week Range (INR)

1, 6, 12 Rel. Per (%)

12M Avg Val (INR M)

Free float (%)

LEMONTRE IN

786

58.9 / 0.8

91 / 62

-8/-1/-24

69.1

The Eagle Eyed

Squeezing opportunities in demand-dense, high ARR markets



Financial Snapshot (INR b)

Y/E Mar

FY19E FY20E FY21E

Sales

5.6

7.8

10.4

EBITDA

1.8

2.8

4.1

0.4

0.8

1.5

EPS (INR)

0.5

1.0

1.9

EBITDA Gr. (%)

28.6

60.3

47.1

EPS Gr. (%)

149.7 115.2

94.2

RoE (%)

4.3

8.6

14.8

RoCE (%)

4.6

6.9

9.5

EV/ EBITDA (x)

42.6

27.4

19.0

P/E (x)

163.7

76.1

39.2

Shareholding pattern (%)

As On

Sep-18 Jun-18 Sep-17

Promoter

39.1

38.7

DII

27.2

40.5

40.8

FII

14.6

0.0

Others

19.1

20.4

20.6



With the Indian hospitality industry at the cusp of an upcycle, LEMONTRE seems

all set to cash in on the upswing. Currently, it plans to increase owned rooms by

1.5x to 4,899 rooms; of this 68% will come up in the high demand and high

average room rate (ARR) markets of Mumbai and Udaipur. We expect revenue to

grow at 29% CAGR over FY18-21 to INR10.4b, backed by room addition and ARR

CAGR of 12% (FY18-21) to INR5,434.

After establishing itself as a leading player in the mid-priced hotel segment, the

company is now well poised to leverage the same and add rooms through the

management contract route. We expect revenue from management contracts to

grow at 62% CAGR over FY18-21 to INR378m.

Existing hotels of LEMONTRE are already operating at 75% occupancy (FY18)

level, thus, any increase in ARR will directly flow to the EBITDA (as 75-80% is fixed

cost). Moreover, 68% of its owned rooms are coming up in high ARR markets,

which should aid EBITDA growth as cost of operating the hotel does not increase

proportionately to ARR increase.

We expect LEMONTRE to deliver revenue/EBITDA CAGR of 29%/ 45% over FY18-

21 to INR10.4b/INR4.1b and expect RoE to improve to 14.8% by FY21 from 1.8%

in FY18. We expect adjusted PAT to grow 10x to INR1,484m by FY21, mainly led

by EBITDA growth.

We ascribe one-year forward EV/EBITDA of 22x to LEMONTRE (10% premium to

Indian Hotels 14-year average of ~20x) considering its strong growth prospects.

We arrive at a target price of INR90 and initiate coverage on LEMONTRE with a

Buy rating.

Lemon Tree Hotels

The Eagle Eyed

Room addition in high ARR market to drive revenue

The Indian hospitality industry is at the cusp of an upcycle with occupancy rates

already breaching the optimum level of 65%. Cashing in on this upswing,

LEMONTRE plans to increase owned rooms by 1.5x to 4,899 rooms over FY18-

21; 68% of this incremental room addition is in the demand-dense and high ARR

markets of Mumbai and Udaipur. In FY18, ARR of LEMONTRE (across brands)

stood at INR3,868; this is expected to increase regardless of an upcycle playing

out as 68% of the incremental room addition is in markets where the ARR is

>INR6,000. According to our estimates, LEMONTRE’s existing hotels located in

NCR, Bangalore, Hyderabad and Goa contribute ~69% to the revenue. Since

hotels located in these cities are already operating at >65% occupancy level, it is

likely that an ARR increase will be witnessed at an earlier stage in the

impending upcycle. Therefore, we expect the company to post revenue CAGR

Please click here for Video Link

Sumant Kumar

23 April 2019

Lemon Tree Hotels

Stock Performance (1-year)

of 29% over FY18-21 to INR10,352m, backed by room addition, improvement in

occupancy (230bp over FY18-21 to 77.8%) and ARR CAGR of 12% (FY18-21) to

INR5,434.

Leveraging its brand via management contracts

After establishing its presence and brand in the mid-priced hotel segment,

LEMONTRE is now well set to leverage it by adding rooms under the ‘management

contract’ model. LEMONTRE added two hotels under management contract in FY14,

adding rooms at 75% CAGR over FY14-18. Hereon, the focus of the company is to

add rooms majorly through management contracts, expecting room addition at 32%

CAGR over FY18-21 to 3,696 rooms. We expect revenue from management contact

to grow at 62% CAGR over FY18-21 to INR378m on account of room addition and

stabilization of existing hotels. Company announced a JV with Warburg to explore

opportunities in the co-living spaces with a corpus of INR30b in the Indian market.

The venture is currently at a nascent stage, but offers a huge growth opportunity for

the company.

Higher ARRs to foster EBITDA growth

Existing hotels of LEMONTRE are already operating at 75% occupancy (FY18) level,

thus, any increase in ARR will directly flow to the EBITDA (as 75-80% is fixed cost).

Additionally, 68% of hotels that will be added incrementally come under the high

ARR markets of Mumbai and Udaipur (>INR6,000) v/s FY18 ARR (INR3,868). This

should aid EBITDA growth as cost of operating the hotel does not increase

proportionately to an ARR increase. Thus, the overall EBITDA/occupied room (ex-

management contract income) is expected to grow at 23% CAGR over FY18-21 to

INR2,661 in FY21. Hence, we expect EBITDA CAGR of 45% over FY18-21 to

INR4,130m. Additionally, LEMONTRE is all set to acquire ‘Keys Hotel’. LEMONTRE

will use its distribution network, which should aid in improving occupancies and

ARRs, thereby increasing EBITDA margins.

Initiating coverage with a Buy rating

We believe that LEMONTRE is well placed to capitalize on the impending

opportunity in the domestic hospitality industry and the expected upcycle due to (a)

its strong presence in the mid-priced hotel segment, (b) line-up of hotel launches in

high demand and high ARR markets, and (c) an increase in the number of rooms

through management contracts. We expect LEMONTRE to deliver revenue/ EBITDA

CAGR of 29%/ 45% over FY18-21 to INR10.4b/ INR4.1b and expect RoE to improve to

14.8% by FY21 from 1.8% in FY18. In FY18, LEMONTRE’s adjusted PAT turned

positive for the first time since FY13 and stood at INR142m. We expect adjusted PAT

to grow 10x to INR1,484m by FY21, mainly led by EBITDA growth. On one-year

forward EV/EBITDA, Indian Hotels (IHIN) has historically traded at a 14-year average

of ~20x. However, we ascribe one-year forward EV/EBITDA of 22x to LEMONTRE

(10% premium) considering its strong growth prospects and arrive at a target price

of INR90. Our target price does not capture the value of its upcoming 669-room

hotel near the Mumbai airport in FY22; value/share stands at INR11 using the DCF

method. We initiate coverage on LEMONTRE with a

Buy

rating.

23 April 2019

Lemon Tree Hotels

Exhibit 1: Initiating with a ‘Buy’ rating (INR m)

Particulars

EBITDA (FY21)

EV/ EBITDA (x)

Less: Net Debt (FY21)

Less: Minority Interest (FY21)

Target Value

No. of shares (m)

Target Price (INR)

CMP (INR)

Upside (%)

FY21

4,130

22.0

90,855

(15,577)

(4,598)

70,680

786

Source: MOFSL

Exhibit 2: Peer comparison

Company Name

Indian Hotels Co

EIH Ltd

Chalet Hotels

Lemon Tree Hotels

MCap

(INR b)

183

109

EV/ EBITDA (x)

FY20E

19.9

23.4

18.9

27.4

FY21E

15.9

23.8

15.9

19.0

51.2

43.4

46.6

76.1

PE (x)

FY20E

FY21E

37.4

46.5

30.7

39.2

8.0

8.1

8.8

8.6

RoE (%)

FY20E

FY21E

10.2

7.2

11.6

14.8

Revenue CAGR % EBITDA CAGR %

FY18-21E

9.5

10.1

11.5

28.8

24.3

16.7

20.3

44.7

Source: Bloomberg, MOFSL

23 April 2019

Lemon Tree Hotels

Story in charts (Hotel industry exhibits)

Exhibit 3: In the last upcycle (over FY04-08), industry occupancy moved above 65%, while ARRs increased at 22% CAGR

Overall Industry

20.5

8.1

-2.1

-10.2

6.4

-7.1

-5.7

9.2

26.6

29.9

13.0

-3.3

-16.0

0.4

-7.4

-4.2

-2.9

-1.4

-0.1

2.6

1.6

Occupancy (%)

Growth in ARR (%)

57.1 55.4 53.9 57.2 51.6 57.2 64.8 69.0 71.5 71.4 68.8 59.5 59.5 60.6 59.3 57.8 58.4 59.8 63.3 64.8 66.6

Exhibit 4: For the last six years, industry occupancy for hotels in India has been on an uptrend

Occupancy (%)

80.0

60.0

40.0

20.0

0.0

5 Star Deluxe (%)

64.8

5 Star (%)

4 Star (%)

3 Star (%)

Overall Average (%)

62.9

69.0 71.5 71.4 68.8

57.2

57.1 55.4 53.9 57.2

51.6

64.8 66.6

59.5 59.5 60.6 59.3 57.8 58.4 59.8 63.3

Exhibit 5: Industry ARRs have remained flattish over FY13-18, despite an improvement in occupancy

ARR (INR/day)

12,000

9,000

6,000

3,000

5 Star Deluxe

5 Star

4 Star

3 Star

Overall Average (%)

10,000

7,500

5,000

2,500

Source: HVS, Hotelivate, MOFSL

23 April 2019

Lemon Tree Hotels

Fast paced room addition to fire up revenues

New hotels in Mumbai to drive ARR over FY18-22



We expect LEMONTRE to post revenue CAGR of 29% over FY18-21 to INR10,352m

mainly due to new hotel launches in the demand-dense and high ARR markets.

The company is adding 1,622 rooms over FY18-21; 68% of the room inventory will

come up in Mumbai and Udaipur — both demand-dense and high ARR markets. Thus,

stabilization is expected at a faster pace and should drive overall ARRs.

The Indian hospitality industry is at the cusp of an upcycle as occupancy levels have

already breached the optimum level of 65%. In the last upcycle, as industry occupancy

crossed the optimum level, ARR grew at a CAGR of 22% over FY04-08. We expect

demand to grow at 10-12% as against supply growth of 5%; this should lead to an ARR

growth of 8-10% in the next cycle.

We expect LEMONTRE’s ARR (across brands) to grow at 12% over FY18-21 to INR5,434

and occupancy to improve by 230bp over FY18-21 to 77.8% in FY21.

LEMONTRE delivered revenue CAGR of 19% over FY15-18 to INR4,843m, primarily

driven by an improvement in the occupancy rate (750bp over FY15-18 to 75.5%) and

growth in ARR (8% CAGR over FY15-18 to INR3,868). Over the same period, the

company added 701 owned rooms to its portfolio of 3,277 rooms. However, we

expect LEMONTRE to post revenue CAGR of 29% over FY18-21 to INR10,352m,

mainly due to room addition in high ARR markets (14% CAGR over FY18-21 to 4,899

rooms) and ARR growth (12% CAGR over FY18-21 to INR5,434). 68% of the

upcoming rooms are located in the dense-demand markets of Mumbai and Udaipur

(thus, would stabilize at a faster pace). It should also command higher ARRs, driving

the overall ARR of the company.

Exhibit 6: Multiple drivers in place to drive revenue

ROOM ADDITION



Adding 1,622 owned rooms

over FY18-21 (up 1.5x); 68% of

the room inventory will come

up in Mumbai (60%)/ Udaipur

(8%) -- cities that have higher

demand and ARRs.



Adding 1,887 managed rooms

over FY18-21 (up 2.2x).

OCCUPANCY IMPROVEMENT



Room addition in the high

demand micro-markets like

Mumbai and Udaipur.



Stabilizing of four hotels (422

rooms), which commenced

operations in FY18.

GROWTH IN ARR



68% of incremental rooms to

be added over FY18-21 are in

Mumbai and Udaipur - a high

yielding market, thus, driving

the overall ARR of LEMONTRE.



Change in customer mix (shift

towards retail and MSME

enterprises) aids in charging

higher rates.



Change in the room mix

(shifting customers towards

premium rooms) to aid in

driving up ARRs.

Source: Company, MOFSL

23 April 2019

Lemon Tree Hotels

Exhibit 7: Revenue to grow at 29% CAGR over FY18-21

Revenue (INRm)

31.0

Growth (%)

26.7

12.0

3.2

17.5

15.0

40.4

32.3

2,148

FY13

2,217

FY14

2,904

FY15

3,680

FY16

4,121

FY17

4,843

FY18

5,570

FY19E

7,822

FY20E

10,352

FY21E

Source: Company, MOFSL

Addition of owned rooms to drive revenue



LEMONTRE commenced operations of its first owned property with 49 rooms

back in FY05. For 10 years, it focused on establishing a strong brand image,

while adding owned rooms at 54% CAGR over FY05-14 (total ~2,386 rooms).

In FY14, the company added two hotels under management contract with 171

rooms. Thus, after establishing a strong brand image; the company added rooms

via management contracts at a faster pace, compared to owned rooms.

The company has increased its rooms (owned and managed) at 17% CAGR over

FY14-18 to 4,870 rooms. Over the same period, rooms under management

contracts grew at 75% CAGR as against owned rooms’ 8% CAGR.

Over FY18-21, LEMONTRE plans to add rooms at 21% CAGR, taking the total

number of rooms to 8,595 (mainly driven by room addition via management

contracts). Management contract rooms are expected to grow at 32% CAGR

over FY18-21 to 3,696 rooms.

Further, the company plans to increase owned rooms by 1.5x to 4,899 rooms by

FY21 (14% CAGR over FY18-21). Of the incremental room addition of 1,622

rooms, 90% will come up under the

Lemon Tree Premier

brand or under its new

upscale brand (to be announced) that operates in the premium segment, thus it

should garner higher ARRs. Additionally, 68% of the incremental rooms (1,622

rooms) are coming up in the demand-dense market of Mumbai (60%) and

Udaipur (8%). Therefore, stabilization of its business is expected at a faster pace

coupled with higher ARRs.

The company has recently announced plans to launch hotels in Udaipur and

Mumbai (near the airport) under a new upscale brand.

Exhibit 9: … at 32% CAGR over FY18-21

Managed Rooms (Nos.)

89.0

82.9

60.2

68.2

Growth (%)

Exhibit 8: Expect room addition at 14% CAGR over FY18-21

24.3

8.0

Own Rooms (Nos.)

15.7

1.6

8.8

Growth (%)

16.4

18.0

8.2

47.4

18.3

33.0

1,920 2,386 2,576 2,788 2,833 3,277 3,567 4,151 4,899

FY13 FY14 FY15 FY16 FY17 FY18 FY19E FY20E FY21E

Source: Company, MOFSL

171

FY14

274

FY15

461

FY16

843

FY17

1,593

FY18

1,885

2,778

3,696

FY19E FY20E FY21E

Source: Company, MOFSL

23 April 2019

Lemon Tree Hotels

Hotels located in the demand-dense region to ensure higher occupancy



LEMONTRE plans to add 1,622 rooms over FY18-21; 60% of which is in the

Mumbai market and located near the airport; thus it should stabilize at a faster

pace.

Typically, airports are the most demand-dense locations in any particular micro-

market. Apart from the company’s two upcoming hotels near Mumbai airport; it

already has two hotels near New Delhi airport. According to our calculations, four

airport hotels would significantly contribute (24%) to the company’s revenue

from FY22 onwards.

Additionally, four hotels with 422 rooms that commenced operations in FY18 are

expected over the next 1- 2 years, thereby aiding an improvement in overall

occupancy.

According to our estimates, LEMONTRE’s hotels in NCR, Bangalore, Hyderabad

and Goa contribute ~69% to the revenue. These are high-demand markets with

hotels operating at >65% occupancy levels. Additionally, hotels in these cities

have an optimum level of occupancy, and thus, they are likely to see ARR

increase at an earlier stage in the impending upcycle.

Against this backdrop, we expect the company’s occupancy to improve by 230bp

over FY18-21.

Exhibit 11: Own room mix, city-wise (FY21)

Delhi

Gurugram

Hyderabad

Bengaluru

City-wise, own room mix (FY21)

22%

20%

Mumbai

Delhi

Gurugram

Hyderabad

10%

14%

13%

11%

Bengaluru

Jaipur

Pune

Others

Source: Company, MOFSL

Exhibit 10: Own room mix, city-wise (FY18)

City-wise, Own room mix (FY18)

20%

15%

20%

19%

16%

Jaipur

Pune

Others

Source: Company, MOFSL

Exhibit 12: NCR occupies larger share in the revenue mix (FY18)

City-wise Revenue Mix - FY18

28%

20%

Delhi

Gurugram

Hyderabad

15%

18%

16%

Bengaluru

Goa

Others

Source: MOFSL

23 April 2019

Lemon Tree Hotels

Expect ARR CAGR of 12% over FY18-21

Upcoming hotels in the high ARR market to ensure ARR growth



LEMONTRE’s blended ARR across its brand currently stands at INR3,868, which

has grown at 8% CAGR over FY15-18. 68% of the incremental room addition

over FY18-21 is in the high ARR (>INR6,000) category, which should drive the

overall ARR of the company, irrespective of the cycle playing out.

Exhibit 13: Strong pipeline of owned hotels expected to commence operations over FY19-21

Hotel Location

LTP, Pune

Red Fox Hotel, Dehradun

LTP, Andheri (East), Mumbai

LTP, Udaipur **

LTP, Kolkata

Lemon Tree Vembanad Lake Resort, Alleppey

Lemon Tree Mountain Resort, Shimla

LTP, Mumbai Airport **

Total

* Rooms are added in the existing hotel | ** Plans to add hotel in new upscale brand

Brand

LTP

RFH

LTP

LTH

LTP

Opening Month

Dec-18

Sep-18

May-19

Oct-19

May-19

Oct-20

Dec-20

Mar-21

Opening in FY

FY19

FY20

FY21

Rooms

199

303

139

142

10*

669

1,622

Source: Company, MOFSL

Existing hotel’s ARR to ride industry upcycle



Over the last five years, demand growth outpaced supply growth, leading to

higher occupancy rates. The hotel industry’s occupancy rate was on an uptrend

over the last six years (FY13-18); ARRs, though, remained flattish.



Industry occupancy rate has already breached the optimum level of 65%.

Historical data indicates a difference in the timing of a pick-up in ARR and

occupancy growth– ARRs usually pick up after a lag. Thus, we expect industry-

wide growth in ARRs once occupancy reaches optimum levels.



In the last upcycle, as industry occupancy crossed the optimum level of

occupancy, ARR grew at CAGR of 22% over FY04-08. We expect demand to grow

at 10-12% as against supply growth of 5%, further driving up occupancy levels.



ARR growth is likely to be lower in the impending upcycle at 8-10% CAGR

compared to the previous upcycle (CAGR of 22% over FY04-08) due to a change

in industry dynamics, which includes (a) easy price discovery through the digital

platform, (b) entry of MNC hotel operators, (c) competition from homestays like

AirBnb, etc., and (d) improving quality of 3/4 star hotels.



Key micro markets like NCR, Bangalore, Hyderabad and Goa from where

LEMONTRE generates ~69% of revenue (FY18) are already operating at >65%

occupancy level, and are likely to see a pick-up in ARRs earlier than other

markets.



Apart from industry tailwinds and entering into high ARR markets, the company

intends to increase its ARRs consciously by adopting the following measures:



Increasing share of retail/ MSME customers to ensure higher ARRs:

Currently retail, MSMEs and large corporates occupy equal share in the

overall customer mix of the company. However, the company is making a

conscious effort to increase the share of higher yielding MSME and retail

customers, which would aid ARR growth of the company.

23 April 2019

Lemon Tree Hotels



Change in product mix:

Upgrading corporate customers to premium rooms

due to unavailability of basic rooms is also expected to aid ARR growth.

Against this backdrop, we expect ARRs (across brands) to grow at 12% CAGR

over FY18-21 to INR5,434.



Exhibit 14: In the last upcycle (over FY04-08), as industry occupancy moved above 65%, ARRs increased at 22% CAGR

Overall Industry

20.5

8.1

-2.1

-10.2

6.4

-7.1

-5.7

9.2

26.6 29.9

13.0

-3.3

-16.0

0.4

-7.4

-4.2

-2.9

-1.4

-0.1

2.6

1.6

Occupancy (%)

Growth in ARR (%)

57.1 55.4 53.9 57.2 51.6 57.2 64.8 69.0 71.5 71.4 68.8 59.5 59.5 60.6 59.3 57.8 58.4 59.8 63.3 64.8 66.6

Exhibit 15: For the last six years, industry occupancy for hotels in India has been on an uptrend

Occupancy (%)

80.0

60.0

40.0

20.0

0.0

62.9

5 Star Deluxe (%)

64.8

5 Star (%)

4 Star (%)

3 Star (%)

Overall Average (%)

69.0 71.5 71.4 68.8

57.2

57.1 55.4 53.9 57.2

51.6

64.8 66.6

59.5 59.5 60.6 59.3 57.8 58.4 59.8 63.3

Exhibit 16: Industry ARRs have remained flattish over FY13-18, despite an improvement in occupancy

ARR (INR/day)

12,000

9,000

6,000

3,000

5 Star Deluxe

5 Star

4 Star

3 Star

Overall Average (%)

10,000

7,500

5,000

2,500

Source: HVS, Hotelivate, MOFSL

23 April 2019

Lemon Tree Hotels

Exhibit 17: For last five years, demand growth has outpaced supply growth, while growth in ARRs have remained flat

Overall Industry

13.0

-3.3

-16.0

0.4

-7.4

-4.2

-2.9

-1.4

-0.1

2.6

1.6

Supply Growth (%)

Demand Growth (%)

ARR Growth (%)

19.6 15.2

3.2

-10.8

27.5 27.5

15.8 17.9

17.9 15.3

11.8 9.0

7.3 8.5

6.4 9.0

3.6 9.7

6.8 9.4

7.5 10.5

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

Demand = Supply * Occupancy

Source: HVS, Hotelivate, MOFSL

Exhibit 18: City-wise demand and supply dynamics at a glance

Location

Key Demand Drivers

Rise in FTA, demand from MICE

and increase in leisure spending

Business travel & MICE

BFSI & PSU segment

ITeS, BPO & telecom

IT, BPO & consumer durables

ITeS & BFSI - business travel

Leisure & MICE travel

ITeS - business travel

Industry LEMONTRE

LEMONTRE

Occupancy

’s Market

Room

rooms

(FY18)

Sh.

Supply

(FY18)

(%)

(FY18)

4,870

636

711

195

493

662

124

128,163

13,726

14,724

5,920

1,515

12,659

6,772

6,741

6,330

3.80

*5.44

4.32

12.01

12.87

3.89

9.78

1.47

1.96

ARR

(FY18)

5,759

7,740

6,586

6,132

5,285

5,807

4,929

7,844

4,411

Expected

Active

Room

Developme

Supply

Demand

nt of Supply

Growth

(FY18-23)

(%)

FY18-23E, %

35,554

2,181

1,298

1,451

481

4,444

885

1,726

796

10-12

8-10

7-9

8-10

7-9

6-8

7-9

~2.5-3

~2.5

India

Mumbai

Delhi

Gurugram

Noida

Bangalore

Goa

Pune

*FY23

Hyderabad ITeS & pharma - business travel

Source: Company, HVS, MOFSL

Exhibit 19: Occupancy and ARR assumptions

Brand

Across Brands

Change (bp/%)

LTP

Change (bp/%)

LTH

Change (bp/%)

RFH

Change (bp/%)

75.0

73.0

78.0

Occupancy (%)

FY16

74.8

FY17

76.8

203

75.0

-300

77.0

400

79.0

400

FY18

75.5

-127

77.0

200

74.0

-300

77.0

-200

FY19E

77.3

174

80.6

356

74.5

78.5

150

FY20E

75.9

-139

74.5

-601

75.5

100

79.5

100

FY21E

77.8

194

76.6

206

76.5

100

79.5

2,278

3,321

3,834

FY16

3,217

FY17

3,451

7.3%

4,123

7.5%

3,522

6.1%

2,372

4.1%

ARR (INR)

FY18

3,868

12.1%

4,773

15.8%

3,848

9.3%

2,860

20.6%

FY19E

4,375

13.1%

5,330

11.7%

4,252

10.5%

3,203

12.0%

FY20E

4,889

11.7%

5,841

9.6%

4,592

8.0%

3,459

8.0%

FY21E

5,434

11.2%

6,377

9.2%

4,914

7.0%

3,702

7.0%

Source: Company, MOFSL

23 April 2019

Lemon Tree Hotels

Leveraging brand equity via management contracts

Co-living – a long-term play



After establishing a strong brand image by adding owned rooms, LEMONTRE now

intends to leverage its brand and distribution network by focusing on adding hotels via

management contract. After launching another property (owned) near Mumbai

Airport, LEMONTRE intends to add rooms majorly through management contract.

Thus, we expect income from management contract to grow at 62% CAGR over FY18-

21 to INR378m, backed by room addition and improvement in the performance of

existing hotels.

Recently, LEMONTRE announced a JV with Warburg to explore opportunities in the co-

living spaces in the Indian market; with a corpus of INR30b (in tranches). Several

proposals are being evaluated by the company currently.

Leveraging strong brand & distribution network via management contract



With the establishment of its strong brand in the mid-market segment,

LEMONTRE has commenced its journey to add rooms under management

contract. Management agreements enable LEMONTRE to benefit from the

extension of its network and brand presence in certain geographies, while

providing quality management and branding to third-party owned hotels.

The company has indicated that incremental room addition will now happen

under management contracts as it requires lower upfront financial investment

v/s acquisition of properties.

As at FY18, the company manages 20 hotels, which represent 1,593 rooms (33%

of total rooms). LEMONTRE has added rooms under management contract at

75% CAGR over FY14-18, outpacing owned room addition growth of 8% CAGR

over the same period.

LEMONTRE operates management contract hotels mainly in Tier-2 and Tier-3

cities. LEMONTRE is typically entitled to a fixed percentage of the gross revenue

of the hotel and also to a variable incentive fee based on performance linked to

the gross operating profit of the hotel.

Management contract income structure:



Management contract services are rendered by LEMONTRE’s subsidiary,

Carnation Hotels Private Limited (Carnation Hotels). Carnation Hotels was

founded in collaboration with Mr. Rattan Keswani (not related to the promoter),

in order to provide hotel management services to third party hotel owners.

LEMONTRE owns 75% stake in Carnation Hotels; balance is held by Mr. Rattan

Keswani.



Net management fee income is ~7-8% of the sales of the property. Management

revenue has three components; these include (i) base fee, (ii) incentive fees, and

(iii) sales and marketing cost.

23 April 2019

Lemon Tree Hotels

Exhibit 20: LTH brand dominates managed rooms

Managed Rooms - 1,593 rooms (FY18)

RFH; 20%

Exhibit 21: Management contact fee structure

Particulars

Base Fee:

>45%

35-45%

Fee structure

2-3% of total revenue

8-10% on EBITDA

5-6% on EBITDA

1-2% on EBITDA

No fees

Source: Company, MOFSL

Incentive Fees: Depending on hotel level EBITDA margin

LTP; 18%

LTH; 63%

25-35%

<25%

Source: Company, MOFSL

Exhibit 22: Room addition under management contract to accelerate

Total Rooms

1,920

Owned Rooms Mix (%)

2,557

2,850

Managed Rooms Mix (%)

4,870

5,452

6,929

8,595

100

FY05

FY13

FY14

FY15

FY18

FY19E

FY20E

FY21E

Source: Company, MOFSL

Incremental room addition to be driven by management contract



After establishing a strong brand in the mid-priced hotel segment, LEMONTRE

intends to leverage its brand equity and add incremental rooms under

management contract.

We expect management contract income to grow at 62% CAGR over FY18-21 to

INR378m on account of room addition and stabilization of rooms that are already

in operation.

Exhibit 23: Upcoming hotels under management contract

Brand

LTH

FY19

Location

Lucknow

Rishikesh

Pune

Mumbai

Keys

102

Brand

RFH

LTH

RFH

LTP

LTH

LTP

LTH

LTP

RFH

FY20

Location

Alwar

Shirdi

Amritsar

Neelkanth

Rishikesh

Gulmarg

Dwarka

Dubai

Jhansi

Aligarh

Coorg

Vijaywada

Keys

102

108

114

Brand

LTH

LTP

LTH

LTP

LTH

LTP

FY21

Location

Bokaro

Gwalior

Manesar

Sonamarg

Thimpu

Ludhiana

Dindy

Mussoorie

Bhubaneshwar

Ranthambore

Vijaywada

Keys

104

260

120

Source: Company, MOFSL

23 April 2019

Lemon Tree Hotels

Exhibit 24: Managed room mix, city-wise – FY18

FY18 - 1,593 Rooms

Noida

12%

11%

48%

Gurugram

Bhiwadi

Alwar

Jaipur

Chandigarh

Others

Source: Company, MOFSL

61%

Exhibit 25: Managed room mix, city-wise – FY21

FY21 - 3,696 Rooms

Manesar

Noida

Gurugram

Rishikesh

Alwar

Bhiwadi

Vijaywada

Dubai

Others

Source: Company, MOFSL

Exhibit 26: Room addition under management contract

Managed Rooms (Nos.)

68.2

82.9

89.0

Growth (%)

Exhibit 27: Management contract revenue to grow at 62%

over FY18-21

Management Contract Revenue (INRm)

81.6

104.5

41.8

46.3

Growth (%)

60.2

47.4

18.3

33.0

-42.1

FY15

FY16

32.4

171

FY14

274

FY15

461

FY16

843

FY17

1,593 1,885 2,778 3,696

FY18

FY19E FY20E FY21E

Source: Company, MOFSL

FY17

FY18

182

FY19E

258

FY20E

378

FY21E

Source: Company, MOFSL

A new venture — Co-living with Warburg



The company recently announced its intention to set up a joint venture with

Warburg Pincus, to explore opportunities in the co-living segment in India. The

Warburg Pincus affiliate/LEMONTRE will hold 68%/30% stake in the JV; with Mr.

Patanjali Keswani, LEMOTRE’s Chairman and Managing Director holding the

balance 2% stake.

The JV partners will invest INR30b in equity (in tranches) to develop rental

housing projects through a combination of green-field purpose-built properties

or by refurbishing existing properties. The platform aims to provide affordable

and conveniently located co-living spaces for students and young professionals.

We believe LEMONTRE’s co-living venture is a huge opportunity in India and the

company is well placed to capitalize on the same through the JV. Though, it’s in

the initial stage, management is evaluating various proposals to add properties

under the platform.

23 April 2019

Lemon Tree Hotels

Higher ARRs to foster EBITDA growth

EBITDA to grow at 45% CAGR over FY18-21



Existing hotels of LEMONTRE are already operating at 75% occupancy (FY18) level,

thus any increase in ARR will directly flow to the EBITDA (as 75-80% is fixed cost). The

lean cost structure of the company provides further support to the EBITDA growth.

Room addition in the high ARR market should help in driving EBITDA, as the cost to

operate rooms will not increase in proportion to ARR. An increase would provide an

additional lever for ARR growth.

We expect the company to deliver EBITDA CAGR of 45% over FY18-21 to INR4,130m,

primarily, on account of operating leverage and incremental ARR growth flowing to

EBITDA.

Additionally, LEOMONTRE is all set to acquire ‘Keys Hotel’ and chip in its distribution

network which would aid in improving occupancy and ARRs thereby inching up EBITDA

margins.

Fixed cost dominates hotel industry’s cost structure

Existing hotels of LEMONTRE are already operating at 75% occupancy (FY18) level,

thus, any increase in ARR will directly flow to the EBITDA (as 75-80% is fixed cost).

In case of LEMONTRE, fixed cost formed 75-80% of the total cost in FY18; the higher

fixed cost as compared to industry is on account of lower F&B income.

Exhibit 28: Hotel industry cost structure

Exhibit 29: FC accounts for 75-80% of total cost for

LEMONTRE

25-30%

35-40%

Employee Cost

F&B Consumed

Power & Fuel

S&D Cost

Others

25-20%

Fixed Cost

Variable Cost

75-80%

10-15%

15-20%

10-15%

Source: CARE, MOFSL

Source: Company, MOFSL

LEMONTRE being a cost-leader provides further support

Hotels operating in the mid-pricing segment need to strike a balance; these have to

maintain cost without compromising on the quality. Following are few instances of

cost control measures employed by the company:



LEMONTRE’s rooms have wooden flooring rather than carpets, which are not

only lower in cost but also save power (wooden flooring consumes less power).



LEMONTRE’s rooms have fixed beds. Therefore, room-cleaning time is saved

leading to the number of rooms maintained by an employee increasing.



According to a survey conducted by HVS, the average development cost/room

for LEMONTRE’s owned hotels during FY11-15 for the upper-midscale /midscale

/economy hotel segments was INR5.9m/INR5.0m/INR4.5m — lower than the

average of select hotels in the respective hotel segments for the same period

(refer exhibit 32).

23 April 2019

Lemon Tree Hotels



LEMONTRE consciously allocates lower space for the lobby as this not only

increases area for rooms, but also saves power costs (due to a smaller lobby).

Similarly, the company also allots less space for restaurants in the hotel.

Typically, room revenues/F&B/other income contributes ~55%/35%/10% to the

revenue mix of a 5-star hotel in India. However, in case of LEMONTRE, revenue mix

is 73%/18%/9%.

Exhibit 30: LEMONTRE has a lower staff/room ratio (x) v/s industry

LTP

LTH

RFH

1.6

1.1

1.2

1.5

0.7

1.1

LTP 2017

Industry 2017

LTH 2017

Industry 2017

RFH 2017

Industry 2017

Source: Company, FHRAI, MOFSL

Exhibit 31: LEMONTRE has lower operating expense as a % of revenue v/s industry across brands

LTP

LTH

RFH

66.5%

56.6%

LTP 2017

Industry 2017

57.7%

71.0%

73.8%

56.8%

LTH 2017

Industry 2017

RFH 2017

Industry 2017

Source: Company, FHRAI, MOFSL

Exhibit 32: Lower development cost/room v/s peers

22.3

Industry

LEMONTRE

Avg Development cost, per room (INR m)

14.0

9.8

7.2

5.9

5.6

3.5

4.5

Luxury

Upper-upscale

Upscale

Upper-midscale

Midscale

Budget

Source: Company, FHRAI, MOFSL

23 April 2019

Lemon Tree Hotels

Growth in ARR to drive EBITDA

We expect the Indian hospitality industry’s ARRs to grow at 8-10% in the impending

upcycle. LEMONTRE is well poised to ride this upcycle in multiple ways:



Imminent upcycle in the domestic hospitality industry should provide an

additional lever for ARR growth, which would drive EBITDA of the company.



Company is adding rooms not only in the high demand but also in the high yield

(ARR) market, which would thus drive overall ARRs of the company. But, cost of

operating rooms in a higher ARR market does not increase in proportion to the

ARR increases. Thus, incremental ARR would directly flow to EBITDA.



The Mumbai and Udaipur hotels are expected to operate at an EBITDA/occupied

room of >INR4,000 v/s LEMONTRE’s FY18 EBITDA/occupied room of INR1,444

(FY18). Thus, this should drive the overall EBITDA of the company.

Exhibit 33: EBITDA/occupied room is significantly higher in the upcoming hotels, which would aid in driving overall EBITDA

Particulars

Existing hotels

All owned hotels

Key operating hotels

LTP, Delhi Airport

LTP, Hitec City, Hyderabad

LTP, Ulsoor Lake, Bangalore

Red Fox Hotel, Delhi Airport

LTH, Electronic City

LTH, Gachibowli

Upcoming key hotels

LTP, Andheri (East), Mumbai

Udaipur **

Mumbai Airport **

LTP, Kolkata

LTP, Pune

Rooms

FY18

3,868

280

267

188

207

175

190

303

139

669

142

199

4,457

4,175

3,990

3,031

3,376

3,181

ARR

FY22

6,079

5,843

5,271

5,037

3,973

4,262

4,016

6,998

11,025

7,500

5,618

5,955

EBITDA/ occupied

room (INR)

FY18

1,444

2,863

3,149

2,922

1,779

2,437

2,172

FY22

4,304

7,194

4,200

4,214

4,466

11%

18%

16%

13%

11%

Source: MOFSL

Revenue

Contribution %

FY18

FY22

EBITDA

Contribution %

FY18

FY22

** Plans to add hotel in new upscale brand

Expect EBITDA to clock 45% CAGR over FY18-21



We expect LEMONTRE to deliver revenue growth of 29% over FY18-21 to

INR10,352m, while EBITDA is expected to grow at 45% over the same period to

INR4,130m. EBITDA growth is expected to outpace revenue growth mainly on

account of operating leverage and ARR growth.

Exhibit 35: ARR to grow at 12% over FY18-21

ARR (INR)

12.1

60.3

47.1

4.8

2,808

FY20E

4,130

FY21E

3,069

FY15

3,217

FY16

3,451

FY17

3,868

FY18

4,375

FY19E

4,889

FY20E

5,434

FY21E

7.3

Growth (%)

13.1

11.7

Exhibit 34: EBITDA to grow at 45% CAGR over FY18-21

EBITDA (INRm)

117.3

99.5

Growth (%)

11.2

15.3

16.8

28.6

507

FY15

1,012

FY16

1,166

FY17

1,362

FY18

1,751

FY19E

Source: Company, MOFSL

23 April 2019

Lemon Tree Hotels

Expanding its wings – ‘Keys Hotel’ acquisition to add 936 owned rooms



LEMONTRE has entered into a non-binding agreement to acquire the hotel

portfolio of ‘Keys Hotels’. Keys Hotels’ operates 7 owned hotels (936 keys) and

14 managed hotels (975 keys). Additionally, it also owns two land parcels for

hotel development in Goa and Raipur. Further clarifications on the acquisition

are awaited from the company, and therefore, we have not factored in the same

into our calculation. Thus, on completion of the acquisition, LEMONTRE will

operate 4,506 owned rooms and 2,747 managed rooms.

With the acquisition of Keys Hotel, LEMONTRE will not only strengthen its

position in the Bangalore and Pune market, but it will also get entry into the

new markets of Trivandrum, Vizag, Kochi and Ludhiana.

However, given that the Indian hospitality industry is at the cusp of an

impending upcycle, we do not expect the ‘Keys Hotel’ acquisition to happen at a

lower valuation. But, we believe LEMONTRE will tap into its distribution

network, which would aid in improving occupancies and ARRs, thereby

increasing EBITDA margins.

Exhibit 36: EBITDA margin of LEMONTRE and Keys Hotel

LEMONTRE EBITDA Margin (%)

27.5%

28.3%

Keys Hotels EBITDA Margin (%)

28.1%

8.5%

3.6%

FY16

FY17

FY18

Source: Company, MOFSL

Exhibit 37: Keys Hotel operates 936 owned rooms across six cities

City Name

Bangalore

Pune

Trivandrum

Ludhiana

Kochi

Vizag

Total

Owned/ Lease

Owned

Long lease

No. of hotels

Rooms

381

101

151

107

936

LEMONTRE’s owned

hotel located in the

market

493

124

617

Source: Company, MOFSL

23 April 2019

Lemon Tree Hotels

Revenue to grow at 29% CAGR over FY18-21

Adj. PAT to grow 10x by FY21



LEMONTRE is expected to deliver revenue CAGR (FY18-21) of 29% to INR 10,352m,

mainly on account of room addition and ARR growth.

We expect adjusted PAT to grow 10x to INR1,484m by FY21 (119% CAGR over FY18-21)

mainly led by EBITDA growth.

We expect total debt of LEMONTRE to peak out by FY22 as the company does not

intend to add owned rooms. LEMONTRE is expected to generate strong CFO of

INR5,623m over FY19-21, which is likely to be deployed towards capex.

We expect RoE of the company to improve significantly from 1.8% in FY18 to 14.8% by

FY21, mainly on account of an improvement in the net profit margin (from 3% in FY18

to 14% in FY21).

Room addition and ARR growth to drive revenue



We expect the company to deliver revenue CAGR of 29% over FY18-21 to

INR10,352m, which is on account of owned room addition and ARR growth (12%

CAGR over FY18-21 to INR5,434).

Additionally, income from management contracts is expected to grow at 62%

CAGR over FY18-21 to INR378m, led by room addition. This would also support

EBITDA margin expansion as revenue would flow directly to EBITDA.

Exhibit 39: Revenue mix trend

Room Revenue (%)

32.3

F&B (%)

Management fee (%)

Exhibit 38: Expect revenue CAGR of 29% over FY18-21

Revenue (INRm)

31.0

Growth (%)

40.4

26.7

17.5

12.0

15.0

4,843

FY18

5,570

FY19E

7,822

FY20E

10,352

FY21E

FY15

2,904

FY15

3,680

FY16

4,121

FY17

FY16

FY17

FY18

FY19E

FY20E

FY21E

Source: Company, MOFSL

Adj. PAT to grow 10x by FY21



In FY18, LEMONTRE’s adjusted PAT turned positive for the first time since FY13

and stood at INR142m (adjusted PAT in 9MFY19 stood at INR204m). We expect

Adj. PAT to grow 10x to INR1,484m by FY21 (119% CAGR over FY18-21), mainly

led by EBITDA growth.

23 April 2019

Lemon Tree Hotels

Exhibit 40: EBITDA to grow at 45% CAGR over FY18-21

EBITDA (INRm)

28.3

Margin (%)

28.1

31.4

35.9

39.9

Exhibit 41: Adj. PAT to grow 10x by FY21

Adj PAT (INRm)

27.5

17.5

142

-534

-312

FY16

-61

FY17

FY18

355

764

1,484

507

FY15

1,012

FY16

1,166

FY17

1,362

FY18

1,751

FY19E

2,808

FY20E

4,130

FY21E

FY15

FY19E

FY20E

FY21E

Source: Company, MOFSL

Post capex completion, net debt to peak in FY22



Net debt is expected to peak in FY22 due to (a) capex for hotels in pipeline

getting completed by FY22, and (b) intends to add rooms through the

management contract model. Net debt is expected to decline post FY22 as cash

flow from operational hotels will be used to repay debt. In our view, LEMONTRE

should generate CFO of INR5,623m over FY19-21. We expect RoE of the

company to improve significantly from 1.8% in FY18 to 14.8% by FY21 mainly on

account of an improvement in the net profit margin (from 3% in FY18 to 14% in

FY21).

Exhibit 43: To generate CFO of INR5.6b over FY19-21

CFO (INRm)

1.4

1,775

1,282

598

1,497

1,582

2,544

Exhibit 42: Net debt to increase on account of capex

Net Debt (INRm)

1.2

0.7

1.0

1.4

Net D/E Ratio (x)

1.6

6,051

FY16

7,747

FY17

9,781

FY18

12,066

FY19E

14,453

FY20E

15,577

FY21E

FY16

FY17

FY18

FY19E

FY20E

FY21E

Source: Company, MOFSL

Exhibit 44: RoE and RoCE to improve

RoCE (%)

RoE (%)

8.6

0.6

2.6

3.4

3.8

4.6

4.3

6.9

9.5

14.8

-0.7

-6.6

FY15

-3.8

FY16

FY17

1.8

FY18

FY19E

FY20E

FY21E

Source: Company, MOFSL

23 April 2019

Lemon Tree Hotels

Valuation and view

Initiating with a Buy rating



The Indian hospitality sector is at the cusp of an upcycle, as the industry is

already operating at 67% occupancy (FY18), which is expected to inch up further

on account of a favorable demand-supply scenario.

We expect ARR growth to moderate to 8-10% in the impending upcycle (v/s ARR

growth of 22% in FY04-08, which was the last upcycle) due to a change in

industry dynamics, these include (a) better price discovery due to digital

platform, (b) entry of global brands through management contract, (c) change in

Foreign Tourist Arrival mix, (d) better availability of service apartments, (e)

better air and road connectivity, and (f) competition from homestays like

AirBnb.

We believe that LEMONTRE is well placed to capitalize on the impending

opportunity in the domestic hospitality industry and expected upcycle due to (a)

a strong presence in the mid-priced hotel segment, (b) line-up of hotel launches

in the high demand market (as well as high ARR market), and (c) increasing the

number of rooms through management contract.

Thus, we expect LEMONTRE to deliver revenue/ EBITDA CAGR of 29%/ 45% over

FY18-21 to INR10.4b/INR4.1b.

On one-year forward EV/EBITDA, Indian Hotels (IHIN) has historically traded at a

14-year average of 20x. Considering LEMONTRE’s strong positioning and growth

prospects, we ascribe one-year forward EV/EBITDA of 22x (10% premium to

IHIN’s one year forward EV/EBITDA multiple) and arrive at a target price of

INR90. We initiate coverage on LEMONTRE with a

Buy

rating.

Exhibit 45: Initiate with Buy

Particulars

EBITDA (FY21)

EV/ EBITDA (x)

Less: Net Debt (FY21)

Less: Minority Interest (FY21)

Target Value

No. of shares (m)

Target Price (INR)

CMP (INR)

Upside (%)

FY21

4,130

22.0

90,855

(15,577)

(4,598)

70,680

786

Source: MOFSL

23 April 2019

Lemon Tree Hotels

Exhibit 46: Peer comparison

Company Name

Indian Hotels Co

EIH Ltd

Chalet Hotels

Lemon Tree Hotels

MCap

(INR b)

183

109

EV/ EBITDA (x)

FY20E

19.9

23.4

18.9

27.4

FY21E

15.9

23.8

15.9

19.0

FY20E

51.2

43.4

46.6

76.1

PE (x)

FY21E

37.4

46.5

30.7

39.2

RoE (%)

FY20E

8.0

8.1

8.8

8.6

FY21E

10.2

7.2

11.6

14.8

Revenue CAGR EBITDA CAGR %

% FY18-21E

FY18-21E

9.5

10.1

11.5

28.8

24.3

16.7

20.3

44.7

Source: Bloomberg, MOFSL



Our target price does not capture the value of its upcoming 669-room hotel near

the Mumbai airport in FY22. We have assumed ARR of INR7,500 and occupancy

of 65% in the first year of its operation (FY22). We value this hotel using the DCF

method with value/share of INR11.

Exhibit 48: WACC Calculation

WACC Calculation

1,270

5.0%

25,363

10,531

4,412

14,943

6,127

8,816

786

Source: MOFSL

Debt/Equity

Tax rate

Risk free rate

Beta

Market risk premium

Cost of equity

Cost of debt

WACC

1.0

33%

8.0%

0.88

15.0%

14.2%

9.5%

10.3%

Source: MOFSL

Exhibit 47: Potential Value from Mumbai airport hotel using

DCF method

DCF Valuation - Valued at the end of FY20

Terminal cash flow (INRm)

Terminal growth rate (%)

Terminal value (INRm)

PV (Terminal Value)

PV (INRm)

Enterprise value (INRm)

Net debt (INRm)

Minority Interest (INRm)

Equity value (INRm)

Equity Shares (m)

Value/share (INR)

23 April 2019

Lemon Tree Hotels

Bull & Bear case

Bull case

The favorable demand-supply scenario in the Indian hospitality industry should

aid in improving the occupancy of LEMONTRE; we have assumed an

improvement in occupancy by 360bp over FY18-21 to 79% in FY21 and 13% ARR

CAGR over FY18-21 to INR5,636 (v/s 12% ARR CAGR in the base case).



Based on these assumptions, we expect revenue/EBITDA CAGR of 32%/53% over

FY18-21.



Target price in the base-case is INR90. However, the target price in our bull case

stands at INR100, implying an upside of 34%.



Bear Case



Occupancy levels might moderate if industry-wide occupancy fails to pick up on

account of weak demand or/and an increase in supply. Thus, we have assumed

a decline in occupancy by 120bp to 76.7% and have factored in ARR CAGR of 9%

over FY18-21 to INR5,073 (v/s our base case 12% ARR growth over FY18-21).



Based on the above assumptions, we expect revenue/EBITDA CAGR of 26%/ 36%

over FY18-21.



We have also factored in lower EV/EBITDA of 20x v/s 22x in our base-case

scenario.



Target price in the base-case is INR90. However, the target price in our bear

case stands at INR59, implying downside of 20%.

Exhibit 49: Scenario Analysis - Bull Case (INR m)

Particulars

EBITDA (FY21)

EV/ EBITDA Multiple (x)

Less: Net Debt (FY21)

Less: Minority Interest (FY21)

Target Value

No. of shares (m)

Target Price (INR)

CMP (INR)

Upside (%)

Amount

4,518

22.0

99,398

(16,188)

(4,616)

78,593

786

100

Source: MOFSL

Exhibit 50: Scenario Analysis - Bear Case (INR m)

Particulars

EBITDA (FY21)

EV/ EBITDA Multiple (x)

Less: Net Debt (FY21)

Less: Minority Interest (FY21)

Target Value

No. of shares (m)

Target Price (INR)

CMP (INR)

Upside (%)

Amount

3,401

68,011

(16,771)

(4,560)

46,680

786

-20

Source: MOFSL

23 April 2019

Lemon Tree Hotels

Company overview

LEMONTRE is India’s largest hotel chain in the mid-priced hotel sector (as of 30

Jun’17) according to Horwath HTL. The mid-priced hotel sector consists of upper-

midscale, midscale and economy segments. The company commenced operation of

its first hotel back in May’04 with 49 keys; currently it operates 5,342 rooms (as of

Jan’19; including hotels operated under management contract). The company has

carved a niche for itself by targeting the Indian middle class with differentiated yet

superior service offerings; thus creating a value-for-money proposition.

Company operates through three hotel brands:

Lemon Tree Premier (LTP):

It is targeted primarily at the upper-midscale hotel

segment catering to business and leisure guests who seek hotels at strategic

locations and are willing to pay for premium service and hotel properties.

Lemon Tree Hotels (LTH):

It is targeted primarily at the midscale hotel segment

catering to business and leisure guests and offers a comfortable, cost-effective

and convenient experience.

Red Fox by Lemon Tree Hotels (RFH):

It is targeted primarily at the economy

hotel segment.

NCR, Bangalore and Hyderabad are the key markets for LEMONTRE as these cities

constitute ~56% of its total room inventory (as of FY18; including management

contract rooms). The company operates predominantly in the domestic market;

however, it has recently forayed into the international market (Dubai) through the

management contract route.

Exhibit 51: Brand-wise room inventory mix (5,342 keys)

Brand mix (rooms) - Jan'19

Exhibit 52: City-wise room inventory mix (4,870 keys)

City-wise room inventory mix (incl mgmt contract) - FY18

NCR

Hyderabad

24%

48%

LTH

LTP

RFH

28%

32%

Bengaluru

Jaipur

Chandigarh

28%

10%

14%

Ahmedabad

Chennai

Others

Source: Company, MOFSL

23 April 2019

Lemon Tree Hotels

Exhibit 53: Revenue grew at 18% CAGR over FY13-18

Revenue (INRm)

31.0

26.7

12.0

3.2

2,148

FY13

2,217

FY14

2,904

FY15

3,680

FY16

4,121

FY17

4,843

FY18

17.5

Growth (%)

Exhibit 54: EBITDA grew at 29% CAGR over FY13-18

EBITDA (INRm)

Margin (%)

27.5

17.4

10.5

375

FY13

233

FY14

507

FY15

1,012

FY16

1,166

FY17

1,362

FY18

17.5

28.3

28.1

Source: Company, MOFSL

Exhibit 55: Corporate structure of LEMONTRE

LEMON TREE

59%

74%

58%

Fleur

41%

Begonia

26%

42%

Nightingale

APG

Source: Company, MOFSL

23 April 2019

Lemon Tree Hotels

SWOT Analysis



Strong brand image

helps in attracting

customers as well as

hotel owners (for

management

contracts)

Largest hotel chain in

the Indian mid-priced

hotel sector

Cost leadership helps

in enjoying higher

margins



Hotel business is

cyclical in nature,

thus, leading to

volatility in earnings

Regulatory approvals

can delay the

commencement of

hotel operations

Business seasonality

(second half is

seasonally stronger)



Room penetration per

1,000 people in India is

lowest at 0.2 v/s global

average of 2.2

LEMONTRE has recently

announced a JV to

enter into co-living,

which offers a huge

opportunity



Homestays like AirBnB

offer an alternative to

leisure travelers,

increasing competitive

intensity

Sudden increase in

supply can affect the

pricing power of hotel

players



23 April 2019

Lemon Tree Hotels

Key risks

The new hotels in Mumbai may fail to pick up as expected

LEMONTRE is planning to add 1,622 rooms over FY18-21, of this 60% will be located

in the Mumbai market. The city of Mumbai is considered a high demand-dense

region in India and has a hotel occupancy rate of 76% as at FY18 (according to HVS).

The company’s two hotels coming up in Mumbai market may fail to pick up as

expected, which can have significant impact on earnings.

Seasonal and cyclical volatility may adversely affect operations

LEMONTRE operates in an industry, which is seasonal in nature. The period when

hotel properties witness higher revenue varies; it depends primarily on the location

and the customer base served. Seasonality and cyclicality in the hotel industry may

contribute to fluctuations in its operational and financial performance.

Economic slowdown in India/globally

Consumer demand for the hotel industry is closely linked to the performance of the

general economy and is sensitive to business and personal discretionary spending

levels. Decreased global or regional demand for hotel services can be especially

pronounced during periods of economic contraction or low levels of economic

growth. The recovery period in the industry may lag overall economic improvement.

23 April 2019

Lemon Tree Hotels

Management overview

Mr. Patanjali Keswani, Chairman & Managing Director

Mr. Keswani holds a Bachelor’s degree in Electrical Engineering from IIT, New Delhi

and an MBA from IIM, Calcutta. He was a Tata Administrative Services Officer and

was associated with the Taj Group of Hotels for a period of 17 years, including as its

Senior Vice-President (Special Projects). He was also associated with A.T. Kearney

Limited, New Delhi, as its Associate Consultant & Director. At present, he is also the

Chairman of the Skill Council for Persons with Disability and a founding member of

the Sector Skill Council for Hospitality, and the Travel & Tourism industry.

Mr. Rattan Keswani, Deputy Managing Director

He holds a Bachelor’s degree in Commerce from DAV College, Punjab University. He

also has a degree in Hotel Management from the Oberoi School of Hotel

Management. Prior to joining the company, Mr. Keswani acted as the President of

Trident Hotels, part of the Oberoi Group, where he spent ~30 years.

Mr. Kapil Sharma, CFO

Mr. Sharma holds a Bachelor’s degree in Commerce from the University of Delhi and

is a qualified Chartered Accountant. He has been associated with the company for

the last 13 years. In the past, has been associated with Leroy Somer & Controls India

Pvt Ltd as its Head of Finance & Accounts.

23 April 2019

Lemon Tree Hotels

Financials and valuations

Consolidated - Income Statement

Y/E March

Total Income from Operations

Change (%)

F&B Consumed

Employees Cost

Other Expenses

Total Expenditure

% of Sales

EBITDA

Margin (%)

Depreciation

EBIT

Int. and Finance Charges

Other Income

PBT bef. EO Exp.

EO Items

PBT after EO Exp.

Total Tax

Tax Rate (%)

Minority Interest

Reported PAT

Adjusted PAT

Change (%)

Margin (%)

FY14

2,217

3.2

244

646

1,093

1,984

89.5

233

10.5

310

-77

488

209

-356

-10.4

100

-493

-22.2

FY15

2,904

31.0

284

782

1,330

2,397

82.5

507

17.5

517

-10

725

134

-601

-5.2

-98

-534

-18.4

FY16

3,680

26.7

346

854

1,468

2,668

72.5

1,012

27.5

522

490

720

-172

126

-73.3

-312

-8.5

FY17

4,121

12.0

353

969

1,633

2,955

71.7

1,166

28.3

510

656

776

118

-2

-2058.7

-61

-1.5

FY18

4,843

17.5

436

1,096

1,949

3,481

71.9

1,362

28.1

526

836

784

126

178

21.3

-2

142

2.9

FY19E

5,570

15.0

501

1,206

2,112

3,819

68.6

1,751

31.4

543

1,208

828

145

525

127

24.2

355

149.7

6.4

FY20E

7,822

40.4

704

1,486

2,824

5,015

64.1

2,808

35.9

708

2,100

1,186

196

1,109

266

24.0

764

115.2

9.8

(INR m)

FY21E

10,352

32.3

926

1,760

3,536

6,222

60.1

4,130

39.9

823

3,307

1,450

259

2,116

508

24.0

124

1,484

94.2

14.3

Consolidated - Balance Sheet

Y/E March

Equity Share Capital

Total Reserves

Net Worth

Minority Interest

Total Loans

Deferred Tax Liabilities

Capital Employed

FY14

1,286

6,706

7,992

2,895

5,589

16,479

12,781

1,223

11,558

1,349

384

3,940

160

724

3,010

840

459

364

3,100

16,479

FY15

7,764

338

8,102

4,223

5,710

18,035

14,095

1,733

12,362

1,671

312

4,617

179

301

4,088

926

334

572

3,691

18,036

FY16

7,780

319

8,099

4,277

6,248

18,693

12,823

507

12,316

2,593

5,092

245

139

4,654

1,366

511

825

3,726

18,693

FY17

7,812

274

8,086

4,284

7,987

20,424

15,114

998

14,116

3,508

4,363

314

176

3,823

1,694

604

1,053

2,669

20,424

FY18

7,864

284

8,148

4,286

10,110

22,588

16,044

1,513

14,531

5,591

146

4,247

525

210

3,458

1,994

811

1,140

2,253

22,588

FY19E

7,864

639

8,503

4,349

12,270

25,166

17,794

2,056

15,738

6,841

146

4,624

458

204

3,899

2,250

889

1,311

2,374

25,166

FY20E

7,864

1,403

9,267

4,450

14,690

28,450

23,844

2,764

21,080

3,791

146

6,445

643

237

5,476

3,079

1,168

1,842

3,366

28,450

(INR M)

FY21E

7,864

2,887

10,751

4,598

15,840

31,232

24,544

3,586

20,957

5,591

146

8,465

119

837

263

7,246

3,995

1,466

2,437

4,471

31,232

Gross Block

Less: Accum. Deprn.

Net Fixed Assets

Goodwill on Consolidation

Capital WIP

Total Investments

Curr. Assets, Loans&Adv.

Inventory

Account Receivables

Cash and Bank Balance

Loans and Advances

Curr. Liability & Prov.

Account Payables

Other Current Liabilities

Provisions

Net Current Assets

Misc Expenditure

Appl. of Funds

23 April 2019

Lemon Tree Hotels

Financials and valuations

Ratios

Y/E March

Basic (INR)

EPS

Cash EPS

BV/Share

DPS

Payout (%)

Valuation (x)

P/E

Cash P/E

P/BV

EV/Sales

EV/EBITDA

Dividend Yield (%)

FCF per share

Return Ratios (%)

RoE

RoCE

RoIC

Working Capital Ratios

Fixed Asset Turnover (x)

Asset Turnover (x)

Inventory (Days)

Debtor (Days)

Creditor (Days)

Leverage Ratio (x)

Current Ratio

Interest Cover Ratio

Net Debt/Equity

FY14

-0.6

-0.2

10.2

0.0

FY15

-0.7

0.0

10.4

0.0

FY16

-0.4

0.3

10.4

0.0

277.2

7.2

18.6

67.7

0.0

-0.8

-6.0

0.7

-0.7

0.2

0.1

4.7

-0.2

0.6

-6.6

0.6

-0.1

0.2

5.0

0.0

0.6

-3.8

2.6

5.4

0.3

0.2

3.7

0.7

FY17

-0.1

0.6

10.4

0.0

129.2

7.2

17.0

60.2

0.0

-1.4

-0.7

3.4

86.9

0.3

0.2

2.6

0.8

1.0

FY18

0.2

0.9

10.4

0.0

408.8

87.0

7.1

14.9

53.0

0.0

-2.4

1.8

3.8

4.0

0.3

0.2

2.1

1.1

1.2

FY19E

0.5

1.1

10.9

0.0

163.7

64.7

6.8

13.4

42.6

0.0

-1.8

4.3

4.6

5.3

0.3

0.2

2.1

1.5

1.4

FY20E

1.0

1.9

11.9

0.0

76.1

39.5

6.3

9.8

27.4

0.0

-1.7

8.6

6.9

7.6

0.3

2.1

1.8

1.5

FY21E

1.9

3.0

13.8

0.0

39.2

25.2

5.4

7.6

19.0

0.0

0.3

14.8

9.5

10.2

0.4

0.3

2.1

2.3

1.4

Consolidated - Cash Flow Statement

Y/E March

OP/(Loss) before Tax

Depreciation

Interest & Finance Charges

Direct Taxes Paid

(Inc)/Dec in WC

CF from Operations

Others

CF from Operating incl EO

(Inc)/Dec in FA

Free Cash Flow

(Pur)/Sale of Investments

Others

CF from Investments

Issue of Shares

Inc/(Dec) in Debt

Interest Paid

Dividend Paid

Others

CF from Fin. Activity

Inc/Dec of Cash

Opening Balance

Closing Balance

FY14

-356

310

409

-265

158

-130

-2,490

-2,462

1,624

-185

-1,051

129

1,939

-457

1,611

588

136

724

FY15

-601

517

639

-131

-875

-451

-57

-508

-1,621

-2,129

139

-21

-1,503

116

2,164

-692

1,588

-423

724

301

FY16

-173

523

667

-122

-297

598

681

-1,320

-639

271

-1,028

847

-687

185

-162

301

139

FY17

-25

510

704

-40

133

1,282

-66

1,216

-2,343

-1,127

-3

-2,292

1,739

-737

110

1,113

139

176

FY18

178

526

658

-38

450

1,775

-629

1,145

-3,012

-1,867

-82

495

-2,600

2,124

-784

1,489

176

211

FY19E

525

543

683

-127

1,497

1,580

-3,000

-1,420

145

-2,855

2,160

-828

-63

1,269

-7

211

204

FY20E

1,109

708

991

-266

-960

1,582

122

1,704

-3,000

-1,296

196

-2,804

2,420

-1,186

-101

1,133

204

237

(INR M)

FY21E

2,116

823

1,191

-508

-1,078

2,544

172

2,716

-2,500

216

259

-2,241

1,150

-1,450

-148

-448

237

263

23 April 2019

REPORT GALLERY

RECENT INITIATING COVERAGE REPORTS

Lemon Tree Hotels

Explanation of Investment Rating

Investment Rating

Expected return (over 12-month)

BUY

>=15%

SELL

< - 10%

NEUTRAL

< - 10 % to 15%

UNDER REVIEW

Rating may undergo a change

NOT RATED

We have forward looking estimates for the stock but we refrain from assigning recommendation

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within

following 30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

Disclosures

The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).

Motilal Oswal Securities Ltd. (MOSL)* is a SEBI Registered Research Analyst having registration no. INH000000412. MOSL, the Research Entity (RE) as defined in the

Regulations, is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial

products. MOSL is a subsidiary company of Motilal Oswal Financial Service Ltd. (MOFSL). MOFSL is a listed public company, the details in respect of which are available on

www.motilaloswal.com.

MOSL is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd.

(NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India (MCX) & National Commodity & Derivatives Exchange Ltd. (NCDEX) for its stock broking

activities & is Depository participant with Central Depository Services Limited (CDSL) & National Securities Depository Limited (NSDL) and is member of Association of Mutual

Funds of India (AMFI) for distribution of financial products. Details of associate entities of Motilal Oswal Securities Limited are available on the website at

http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf

MOSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and

buy or sell the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other

compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have

any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the

specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL even

though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report

MOSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should

be aware that MOSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant

banking, investment banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Securities Limited are available on the website at

https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx

A graph of daily closing prices of securities is available at

www.nseindia.com, www.bseindia.com.

Research Analyst views on Subject Company may vary based on Fundamental

research and Technical Research. Proprietary trading desk of MOSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from

MOSL research activity and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.

Regional Disclosures (outside India)

This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability

or use would be contrary to law, regulation or which would subject MOSL & its group companies to registration or licensing requirements within such jurisdictions.

For Hong Kong:

This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong

Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst

Regulations) 2014 Motilal Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of

research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity

to which this document relates is only available to professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these

securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not

located in Hong Kong & are not conducting Research Analysis in Hong Kong.

For U.S.

Motilal Oswal Securities Limited (MOSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state

laws in the United States. In addition MOSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together

with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment

services provided by MOSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to

"Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This

document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only

available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the

U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct

business with Institutional Investors based in the U.S., MOSL has entered into a chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International

Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.

The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S.

registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public

appearances and trading securities held by a research analyst account.

For Singapore

In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets

services license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and

Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL

in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”,

of which some of whom may consist of "accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the

SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and

inform MOCMSPL.

Specific Disclosures

1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.

2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company

3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months

4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report

5 Research Analyst has not served as director/officer/employee in the subject company

6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months

8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months

9 MOSL has not received any compensation or other benefits from third party in connection with the research report

10 MOSL has not engaged in market making activity for the subject company

****************************************************************

23 April 2019

Lemon Tree Hotels

****************************************************************

The associates of MOSL may have:

financial interest in the subject company

actual/beneficial ownership of 1% or more securities in the subject company

received compensation/other benefits from the subject company in the past 12 months

other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on

the specific recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOSL

even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.

acted as a manager or co-manager of public offering of securities of the subject company in past 12 months

be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the

company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies)

received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.

The associates of MOSL has not received any compensation or other benefits from third party in connection with the research report

Above disclosures include beneficial holdings lying in demat account of MOSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not

consider demat accounts which are opened in name of MOSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOSL also earns DP income from

clients which are not considered in above disclosures.

Analyst Certification

The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the

research analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.

Terms & Conditions:

This report has been prepared by MOSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and

may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent

of MOSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature.

The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty,

representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The

report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial

instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOSL will not treat recipients as

customers by virtue of their receiving this report.

Disclaimer:

The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or

distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for

informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing

in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances.

The securities discussed and opinions expressed in this report may not be suitable for all investors, who must make their own investment decisions, based on their own investment

objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this

document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this

document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views

expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as non-investment grade

securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of

the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and

should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The Company reserves the right to make

modifications and alternations to this statement as may be required from time to time without any prior approval. MOSL, its associates, their directors and the employees may from

time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to

perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a

separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of

information that is already available in publicly accessible media or developed through analysis of MOSL. The views expressed are those of the analyst, and the Company may or

may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on,

directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or

entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law,

regulation or which would subject MOSL to any registration or licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all

jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither

the Firm, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue

or lost profits that may arise from or in connection with the use of the information.

The person accessing this information specifically agrees to exempt MOSL or any of its affiliates

or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOSL or any of its affiliates or employees responsible for any such misuse

and further agrees to hold MOSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing

this information due to any errors and delays.

Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022-3980

4263; www.motilaloswal.com. Correspondence Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad (West), Mumbai- 400 064. Tel No: 022 3080

1000. Compliance Officer: Neeraj Agarwal, Email Id:

na@motilaloswal.com,

Contact No.:022-38281085.

Registration details: MOSL: SEBI Registration: INZ000158836 (BSE/NSE/MCX/NCDEX); CDSL: IN-DP-16-2015; NSDL: IN-DP-NSDL-152-2000; Research Analyst: INH000000412.

AMFI: ARN 17397. Investment Adviser: INA000007100. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670) offers PMS and Mutual

Funds products. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.: INP000004409) offers wealth management solutions. *Motilal Oswal Securities Ltd.

is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs, Insurance and IPO products. *Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. offers Real Estate

products. * Motilal Oswal Private Equity Investment Advisors Pvt. Ltd. offers Private Equity products.

* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National

Company Law Tribunal, Mumbai Bench. The existing registration no(s) of MOSL would be used until receipt of new MOFSL registration numbers.

23 April 2019