The Leela's $400 Million IPO to Fund Luxury Expansion in India

The Leela plans to pay down debt and expand its luxury footprint across spiritual, heritage, and wildlife destinations.
No new brands. Niche luxury segments. That is what The Leela is planning post its IPO – $400 million (INR 35 billion) offering set for Monday.
Parent company Schloss Bangalore aims to use proceeds to pay down debt, said Ankur Gupta, managing partner at Brookfield Asset Management, which acquired The Leela in 2019.
The remaining IPO proceeds are meant to be used for acquisitions, marketing, and other initiatives at the company, which has 13 properties, including five owned hotels.
In a press conference Friday, the company shared more on its future plans. Here's what we learned:
Sticking with luxury: Schloss Bangalore is not planning to move away from luxury and ultra-luxury. 'There is a lot of opportunity in this space,' said CEO Anuraag Bhatnagar.
No new brands: Unlike its competitors, it will not be adding brands. It will open hospitality assets under The Leela brand, further segmented into Palaces, Hotels, and Resorts.
The pipeline: In its Red Herring Prospectus, the company said it has a pipeline of seven hotels with 678 keys in development. They are expected to be operational by 2028.
Niche luxury segments: It is planning to enter spiritual luxury accommodation segment with an upcoming property in Ayodhya, the hill station leisure space in Srinagar and Gangtok, wildlife offerings in Bandhavgarh, and heritage space in Agra and Ranthambore.
New business segment: It is also entering the business segment with serviced apartments in Mumbai.
Staying domestic: The Leela currently has no plans for international expansion, but it is considering options, and noted that locations such as Maldives and Dubai are under-penetrated by Indian luxury brands.
Pipeline Details
By 2028, The Leela's inventory will reach 4,200 keys, about 18% of the total luxury rooms in the country, Bhatnagar said. Currently, the company accounts for over 10% of the rooms in the luxury hotels space in India, according to The Leela's estimates.
The pipeline is a part of The Leela's efforts to diversify its luxury offerings in different niche segments.
In its prospectus, The Leela said that it will focus on gateway cities such as Mumbai, wildlife destinations, heritage spaces, wellness destinations, and spiritual tourism destinations for expansion.
Most of the properties in its current pipeline have a low room inventory to maintain the luxury experience. For instance, the upcoming property in Ranthambore is expected to have only 76 rooms, while the Bandhavgarh resort is currently slated to have 30 keys.
Diversifying in the Luxury Space
'We have refined and perfected ourselves in the luxury space,' Bhatanagar said, when asked about why the company is choosing to remain in the luxury segment and not diversify.
He also cited examples of global companies such as Four Seasons and Mandarin Oriental, which continue to operate in the luxury space without getting 'distracted by any other brand or any other sub-segment.'
Chief financial officer Ravi Shankar claims The Leela commands a 40% premium in its revenue per available room (RevPAR) and non-room revenue over the average in the luxury space.
The company is also planning to launch a members-only club called Arq in its New Delhi, Bangalore, and Chennai properties to offer exclusive experiences.
In October last year, The Leela announced the launch of Arq by The Leela - its collection of 'ultra-luxury villas,' which debuted at The Leela Palace Udaipur. The offering is meant for ultra high-net worth individuals and elite guests and more of these villas are expected to be added in the company's portfolio.
While it is currently open to all, The Leela is hoping for this segment to reach a stage in terms of demand where members of the Arq club will get preference over non-members in booking the villas.

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