Schloss Bangalore IPO: Key details investors need to know

The wait will be over on May 26 when the initial public offering (IPO) of Schloss Bangalore Limited, owner and operator of The Leela luxury hotel chain, will open for public subscription. This is one of the largest IPOs in India's hospitality space in many years, thus generating a lot of interest from institutional and retail investors.

Company Overview

Schloss Bangalore Limited is an important player in India's luxury hospitality sector; it owns, manages, operates and develops luxury hotels and resorts under the "The Leela" brand. For example, as of March 31, 2025, the 13 assets in Schloss Bangalore's portfolio comprise 3,553 operational hotel keys, including five owned hotels, seven managed hotels through hotel management agreements, and one franchisee.

The Leela brand has positioned itself as a luxury hotel, providing high-quality amenities, spacious rooms and premium services. This thus allows it to command higher average room rates while cultivating a loyal customer base.

IPO Structure and Offer Details

Total issue size

The Schloss Bangalore IPO comprises equity shares aggregating up to ₹3,500 crore with a face value of ₹10 each.

Components of the offer

• Fresh Issue: Up to ₹2,500 crore

• Offer for Sale (OFS): Up to ₹1,000 crore by the main promoter selling shareholder, Project Ballet Bangalore Holdings (DIFC) Pvt Ltd.

Listing

Shares are proposed to be listed on both BSE and NSE, with NSE as the designated stock exchange.

Key Dates

• Anchor Investor Bidding: May 23, 2025
  
• Public Offer Opens: May 26, 2025
  
• Public Offer Closes: May 28, 2025
  
• Listing date: June 2, 2025
  
• Initiation of refunds: May 30, 2025
  
• Credit of shares to the demat account: May 30, 2025
  
• Basis of allotment: May 29, 2025
  

Book Running Lead Managers

A consortium of major investment institutions is managing the IPO, including JM Financial Limited, BofA Securities India Limited, Morgan Stanley India Private Limited, J.P. Morgan India Private Limited, Kotak Mahindra Capital Company Limited, Axis Capital Limited, Citigroup Global Markets India Private Limited, IIFL Capital Services Limited, ICICI Securities Limited, Motilal Oswal Investment Advisors Limited, and SBI Capital Markets Limited.

IPO Process and Eligibility

The IPO is required to allocate a minimum of 75% to Qualified Institutional Buyers (QIBs), up to 15% to Non-Institutional Investors (NIIs, or high-net-worth individuals), and, if any are left over, up to 10% to Retail Individual Investors (RIIs). Anchor investors can be allocated up to 60% of QIB, with one-third of that share being reserved for domestic mutual funds.

Registrar

KFin Technologies Limited

Promoters and Shareholding

The firm is promoted by various corporate bodies registered under the laws of the Dubai International Financial Centre (DIFC). The largest pre-offer stake is with Project Ballet Bangalore Holdings (DIFC) Pvt Ltd, holding a stake of 63.65%. Prior to the IPO, all shareholding is held with the promoters and promoter group.

Highlights

• The company turned profitable in FY 2025 after two consecutive years of losses.

• Net worth, previously negative, became positive in FY 2025.

• Borrowings remain high, with finance costs representing over 32% of total income in FY 2025.

Industry Outlook

India's luxury hospitality sector stands to grow tremendously. The country's GDP is expected to almost double from 2023 to 2030, while the demand for luxury hotel rooms will also grow in the coming years, expected at a compound annual growth rate of 10.6%. This sets up a strong backdrop for the expansion and profitability of Schloss Bangalore Ltd.

Strengths:

Leading Luxury Hospitality Brand with Rich Heritage and Global Appeal

The Leela brand is associated with luxury and is established as a leading luxury hospitality brand in the world. Their properties are widely recognized for the superior quality of architecture, guest facilities and services, repeatedly earning top rankings alongside the world’s best hotels. They are renowned for the travel experiences they provide. These have been captured by recognized publications such as Travel + Leisure and Conde Nast Traveler.

Marquee Owned Hotels in Markets with High Barriers to Entry(2)

Their owned portfolio includes five hotels comprising 1,224 keys as of March 31, 2025, across top business and leisure destinations in India –Bengaluru (Karnataka), Chennai (Tamil Nadu), New Delhi (Delhi), Jaipur (Rajasthan) and Udaipur (Rajasthan). Renowned as modern palaces, these hotels blend traditional Indian architecture with contemporary luxury, and offer luxury experiences to enhance guest stays.

Risks and Concerns

• Concentration Risk: More than 90% of the company’s income comes from its five owned hotels. Any adverse event affecting these properties or their locations could significantly impact financial results.

• Past Losses and Negative Cash Flows: The company and some subsidiaries have a history of losses and negative cash flows, raising concerns about future profitability and liquidity.

• High Debt: As of March 31, 2025, total borrowings stood at ₹3,908.74 crore. Failure to service this debt could lead to asset seizures.

• Contingent Liabilities: As of March 31, 2025, contingent liabilities totalled ₹494.14 crore, including disputed statutory liabilities and floor area ratio charges.

Related Party Transactions

The company has a considerable number of related party transactions, which include management fees, reimbursement, an interest expense on debentures, and business support services provided to it by the fellow subsidiary and its promoters. These transactions are normal when dealing with large organisations but must be carefully reviewed to identify possible conflict of interest issues.

Conclusion

With exposure to India's luxury hospitality sector through The Leela brand, Schloss Bangalore Limited's IPO provides exposure to new investors. The company has recently turned profitable, with the potential for industry growth as a tailwind. Nevertheless, significant risks remain.

Its high debt, concentration risk and history of negative cash flows could be serious problems. While the primary objective of the IPO is to pay debt and improve the balance sheet, investors need to think thoughtfully about both – their individual risk tolerance and investment horizon, and closely review the company's financial statements, risks and contingent liabilities prior to making an investment.