Luxury hotel operator Schloss Bangalore plans Rs 5,000 crore IPO

Schloss Bangalore, the operator of luxury hotels and resorts under the Leela brand, is all set to enter the Indian capital markets. The company, on September 20, 2024, submitted its Draft Red Herring Prospectus (DRHP) to the Securities and Exchange Board of India (SEBI), seeking to raise Rs 5,000 crore through an Initial Public Offering (IPO). The luxury hospitality chain intends to use the funds primarily for debt repayment and general corporate purposes.

The Schloss Bangalore IPO aims to raise ₹3,000 crore through a fresh issue of shares, with an additional Rs 2,000 crore generated via an offer-for-sale (OFS) by its sole promoter, Project Ballet Bangalore Holdings (DIFC), an institutionally owned entity.

The IPO will be managed by a strong consortium of 11 merchant bankers, including JM Financial, BofA Securities India, Morgan Stanley India Company, JP Morgan India, Kotak Mahindra Capital Company, Axis Capital, Citigroup Global Markets India, IIFL Securities, ICICI Securities, Motilal Oswal Investment Advisors, and SBI Capital Markets. KFin Technologies has been appointed as the official registrar to the issue, managing the administrative aspects of the IPO.

The company may, additionally, explore a pre-IPO placement of Rs 600 crore through a preferential offer. If this placement takes place, the size of the fresh issue will be adjusted before filing the Red Herring Prospectus with the Registrar of Companies (ROC) or launching the IPO for public subscription.

Schloss Bangalore, operator of high-end hotels and resorts under the Leela brand, has detailed its plans for the IPO proceeds. A substantial portion – 2,700 crore from the fresh issue – will be dedicated to repaying debt at both the parent company and its subsidiaries. As of May 2024, the company's consolidated debt was Rs 4,052.5 crore. The remaining funds from the fresh issue will be allocated for general corporate purposes, enabling the company to improve operational efficiency and explore growth opportunities. Meanwhile, proceeds from the offer-for-sale will provide liquidity to the promoter, Project Ballet Bangalore Holdings (DIFC).

Schloss Bangalore has demonstrated a notable improvement in financial performance over recent years. In fiscal 2024, the company reported a net loss of Rs 2.1 crore, significantly better than the Rs 61.7 crore loss in FY23 and the Rs 319.8 crore loss in FY22. However, challenges persist as the company faced a loss of Rs 36.4 crore in just the first two months of fiscal 2025, exceeding the total loss for the entire previous year.

Founded in 1986 by late Captain CP Krishnan Nair, Schloss Bangalore boasts a portfolio of luxury properties under the Leela brand. At present, the company manages 3,382 keys across 12 operational hotels, including five owned properties, six managed through long-term agreements, and one franchise-operated hotel. Known for opulent accommodations and world-class dining, Schloss Bangalore competes directly with major players in the luxury hospitality sector, such as Indian Hotels Company Limited (IHCL), EIH Limited, Chalet Hotels, and Juniper Hotels.