Leela Hotels Shares: Buy, Hold, or Sell After Weak Listing?

On June 2, 2025, Schloss Bangalore Ltd, the parent company of the luxury hotel chain "The Leela," made its debut on the Indian stock exchanges. Despite high expectations, the shares listed at ₹406 on the NSE, a 6.7% discount from the IPO price of ₹435, signaling a tepid market response. 

Market Debut: A Lukewarm Reception

The IPO, which raised ₹3,000 crore through fresh issuance and ₹2,000 crore via an offer for sale by Brookfield Asset Management, was the second-largest in India for 2025. While institutional investors showed strong interest, oversubscribing their portion by over seven times, retail participation was subdued at 83%. 

Analysts attribute the weak listing to concerns over high valuations, significant debt, and lower occupancy rates compared to peers. Schloss reported a 70% occupancy rate in FY25, trailing Indian Hotels Company's 78% and EIH Associated Hotels' 79%. 

Financial Health: Debt and Profitability

Leela's financial journey has been tumultuous. After accumulating around ₹5,000 crore in debt by FY14, the company underwent insolvency proceedings in 2019. Brookfield's acquisition of key assets for ₹3,950 crore marked a turning point, shifting Leela's model from ownership-led to management-led. 

As of FY24, Leela reduced its debt to ₹3,775 crore and plans to use ₹2,700 crore from the IPO proceeds for further repayment. Despite these efforts, the company reported a net loss of ₹2 crore in FY24, primarily due to high interest payments. In contrast, competitors like EIH reported a net profit of ₹678 crore during the same period. 

Strategic Expansion Plans

Looking ahead, Leela aims to capitalize on India's growing luxury tourism sector. The company plans to add eight new hotels, including properties in Agra, Srinagar, and wildlife sanctuaries like Ranthambore and Bandhavgarh, by 2028. Additionally, Leela is venturing into spiritual tourism with a modern palace hotel in Ayodhya and expanding into serviced apartments near Mumbai's international airport. 

Analyst Recommendations: Buy, Hold, or Sell?

Given the current scenario, analysts offer a mixed outlook:

• Buy: Investors with a long-term horizon may consider buying, banking on Leela's brand strength and expansion plans.

• Hold: Those who participated in the IPO might opt to hold, awaiting clearer signs of financial turnaround and improved occupancy rates.

• Sell: Risk-averse investors concerned about debt levels and profitability may choose to exit, especially if the stock doesn't show upward momentum in the near term.

Conclusion

Leela Hotels' weak listing reflects underlying concerns about its financial health and market positioning. While the brand has a storied legacy and ambitious growth plans, investors should closely monitor its debt reduction efforts, occupancy improvements, and overall profitability before making investment decisions.