Lemon Tree Hotels Ltd Q2FY26 – The Mid-Priced Maharaja with Champagne Ambitions and Filter Coffee Cashflows

1. At a Glance

Lemon Tree Hotels Ltd (NSE: LEMONTREE) – the empire of the middle class dreamer who wants “Taj-level linen with Saravana Bhavan-level pricing.” With a market cap of ₹11,995 crore and a current price of ₹151 (down 2.4% intraday), the company is India’slargest mid-priced and third-largest hotel chain overall, ruling the subcontinent’s upper-midscale hospitality jungle.

The latest quarterly results for Q2FY26 show consolidated income of₹307.9 croreand PAT of₹41.9 crore, marking a16.7% YoY profit riseand7.7% sales uptick— not bad for a company that rents you peace and WiFi for ₹6,000 a night.

Occupancy stood tall at72.5%, Average Room Rate (ARR) clocked₹6,236, and RevPAR (Revenue per Available Room) strutted at₹4,523— enough to buy you a meal at their buffet but maybe not the dessert.

As theBhagavad Gitagently reminds,“Karmanye vadhikaraste, ma phaleshu kadachana”— focus on the work, not the result. Lemon Tree, it seems, is doing just that — adding hotels faster than guests can check out.

2. Introduction

If there’s one company that’s cracked the Indian hospitality paradox — giving you plush beds, complimentary breakfast, and that one towel shaped like a swan — it’s Lemon Tree Hotels.

Born in 2002, when hotel chains still believed “budget” meant “broken AC,” Lemon Tree has now become theoxygen mask of India’s hospitality industry. The brand has blended efficiency, affordability, and a refreshing sense of humor into its DNA.

As of Q1FY26, Lemon Tree operates226 hotels with 18,431 roomsacross 50+ Indian cities, plus international outposts in Bhutan, Nepal, and Dubai. It’s not just a hotel chain anymore — it’s a hospitality hydra with five heads: Aurika, Lemon Tree Premier, Lemon Tree Hotels, Red Fox, and Keys. Each brand targets a different economic species, from the corporate honcho to the conference-lunch survivor.

The stock’s 5-year return? A cool36% CAGR. Profits over 5 years?207% CAGR. That’s the kind of growth that makes even chaiwallahs consider franchising.

But here’s the twist: despite consistent profits,they don’t pay a dividend. Instead, they reinvest like a middle-class uncle saving for his third flat. You don’t get cash, you get expansion — fair trade in this inflationary circus.

3. Business Model – WTF Do They Even Do?

Lemon Tree operates in three avatars:

• Asset Owner (Fleur Hotels Pvt Ltd – 58.91% subsidiary):Owns premium properties, including the upcoming Aurika 5-star in Delhi NCR’s Nehru Place. Fleur is expected to go public by FY28, maybe as a REIT. Because why settle for room revenue when you can sell the rooms to investors?
• Asset Manager (Carnation Hotels Pvt Ltd – 100% subsidiary):The brains managing third-party hotels. Currently managing63+ hotelswith 4,087 rooms, and targeting260+ hotels and 15,000+ roomsby 2028. The plan? Merge this arm into Lemon Tree itself.
• Franchise & Management Fees:They earn management income — ₹43.7 crore this quarter — from franchisees and Fleur. Roughly ₹25.3 crore came from Fleur alone, which means they charge rent to their own cousins.

The strategy is clear:become asset-light. By FY28, 70%+ of their portfolio will be third-party managed. Translation: “We’ll run your hotel, make money from it, and still not pay your electricity bill.”

The result? Steady expansion without crippling debt. And maybe, finally, a peaceful night’s sleep for their CFO.

4. Financials Overview

Annualized EPS = ₹1.76 → P/E = 151 / 1.76 = 85.8x. Ouch. P/E not for the faint-hearted.

Commentary:At this valuation, even your neighborhood chaiwala might ask, “Boss, room milta hai kya with this P/E?” But high P/E is common in hospitality because of cyclical earnings — and optimism