| Schloss Bangalore Limited | ||||
| Rating upgraded to 'Crisil AA/Stable' | ||||
| Rating Action | ||||
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| Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings. | ||||
| 1 crore = 10 million | ||||
| Refer to Annexure for Details of Instruments & Bank Facilities |
Detailed Rationale Crisil Ratings has upgraded its rating on the long-term bank facilities of Schloss Bangalore Limited (SBL; a part of the Schloss group) to ‘Crisil AA/Stable’ from ‘Crisil A-/Positive’.
The upgrade in the ratings reflects significant strengthening in SBL’s financial risk profile following substantial debt reduction post its initial public offering, improvement in business risk profile driven by higher than expected occupancies and ARRs in its hotels and expectations of sharp improvement in net cash accruals which will support the company’s business growth while maintaining significantly low leverage over the medium term. Further, continued articulation and demonstration of strategic, operational and financial support from the Brookfield group also adds comfort to the credit risk profile of SBL.
SBL raised Rs. 3,500 crore through an initial public offering in June 2025 comprising of a primary issuance of Rs. 2,500 crore and an Offer for Sale of Rs. 1,000 cr. Of the primary proceeds, Rs. 2,300 crore has been utilized for debt reduction resulting in substantial improvement in the capital structure and debt protection metrics of the Schloss group. Gross debt levels (including lease liabilities) have reduced to ~Rs. 1500 crore from levels of ~Rs. 4,000 crore as on 31st March 2025. Further, company has sizeable cash surplus (Rs. 1341 crore as on March 31, 2025) on its balance sheet further bolstering the overall credit profile.
The company’s business risk profile continues to strengthen, underpinned by a diverse portfolio of luxury hotels operating under the well-known luxury brand “The Leela”. SBL’s properties enjoy strong market positioning with healthy operating metrics (industry-leading average room rates, RevPAR and EBITDA margin) and benefit from a geographically diversified presence across major metro cities and key leisure destinations in India.
SBL has a portfolio of 13 fully operational hotels (5 owned, 7 managed, and 1 franchised), with a total key count of 3,553 as on March 2025. The portfolio is spread across top metros and tourism hubs such as Bengaluru, Delhi, Chennai, Udaipur, Hyderabad, Gurugram, Gandhinagar, and Kerala. Additionally, ~725 keys are expected to be added through upcoming properties in Mumbai, Agra, Ayodhya, Ranthambore, Bandhavgarh, and Srinagar over the next five fiscals alongside capex-driven refurbishments and upgrades at existing flagship hotels. The group enjoys strong brand equity through ‘The Leela’ positioning, supported by strategic locations, premium offerings, and global expertise from Brookfield. These factors, along with robust demand drivers, aid SBL in maintaining high ARR and RevPARs. SBL’s consolidated revenue improved to Rs. 1,345 crores in FY25 from Rs. 1,206 crore in FY24, supported by healthy growth in both room revenue and ancillary streams such as premium F&B, retail leasing, banqueting. Revenue from managed portfolio grew to Rs. 69.8 crore in fiscal 2025, from Rs. 59.4 crore in FY24, driven by both key additions and better fee realisation. EBITDA margin remained strong at 47.5% in FY25 (from 48.3% in FY24), supported by a premium pricing structure, high occupancy, and effective cost control.
SBL’s financial risk profile has strengthened significantly post IPO in June 2025. As a result, gearing is expected to improve to below ~0.5x in the medium term, from 1.34x in FY25. Net debt to EBITDA (currently at ~0.3x) is expected to sustain below 2.5 times in the medium term, compared to above 4x in FY25, aided by deleveraging, substantial liquid surplus and EBITDA growth. Company had bank balances of Rs 1,341 crore as on March 31, 2025 (including Rs. 1,252 crore unencumbered) aided by infusion of compulsorily convertible preference shares of ~1,190 crore in fiscal 2025. Further, interest coverage is also expected to improve to over 5 times over the medium term. This is despite the company having sizeable capex plans of ~Rs. 750–800 crore per annum over FY26–FY28. Going forward, maintaining prudent financial discipline and timely execution of capex without cost overruns will remain key monitorables. Given the substantial capex outlay in the medium term, any delay in project execution or cost overruns could impact the company’s financial position, making timely project execution and cost management a key monitorable.
The ratings continue to take comfort from Brookfield group’s (deriving strength from Brookfield Asset Management’s (BAM)) ability to exercise control on the financial and liquidity management of the company as well as from its intention to extend support to the entity, if and when needed. Brookfield group, through BSREP III India Holding (DIFC) Ltd continues to holds majority ~75.91% shareholding in SBL post IPO. Crisil Ratings also understand that Brookfield group will continue to provide strategic guidance and support to SBL both on an ongoing basis and in the event of any exigency. These strengths are partially offset by the susceptibility of revenue and profitability to cyclicality in the hospitality industry and risks related to sizeable capex being incurred over the medium term. |
Analytical Approach Crisil Ratings has combined the business and financial risk profiles of SBL and its subsidiaries Schloss Chanakya Pvt Ltd (SCHPL), Schloss Chennai Pvt Ltd (SCPL), Schloss Udaipur Pvt Ltd (SUPL), Schloss HMA Pvt Ltd (SHPL), Schloss Gandhinagar Pvt Ltd (SGPL), Leela Palace and Resorts Ltd (LPRL), Tulsi Palace Resort Pvt Ltd (TPRPL), Leela BKC Holdings Pvt Ltd, Schloss Tadoba Pvt Ltd, Transition Cleantech Services Five Pvt Ltd, Inside India Resorts Pvt Ltd, Anasvish Tiger camp Pvt Ltd, Buildminds Real Estate Pvt Ltd, Aries Holdings (DIFC) Limited because of their strong business and financial linkages, common management and fungibility of funds. All the companies are collectively referred to as Schloss group.
Crisil Ratings has also notched up the rating assigned to the group to factor in strong managerial, business, and financial benefits of the parent Brookfield group, deriving strength from Brookfield Asset Management (BAM).
Crisil Ratings has also noted the corporate guarantee (for a total quantum of Rs 300 crore) provided by BSREP III to the lenders (SBI) of the Schloss group for meeting any shortfall in debt servicing or fund requirement over the tenure of the debt continues to remain as on date. However, the same is expected to be withdrawn going forward.
Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation |
Key Rating Drivers & Detailed Description Strengths: Healthy operating performance and reputed brand in the luxury hospitality segment and diversified portfolio of assets Leela is an established brand in the luxury hotel space and operates in key Indian markets, which have high entry barrier and are strategically important. Presence in prime locations helped these properties attract both leisure as well as business demand.
Given the strong brand position, these properties have maintained healthy occupancy and ARR. Consolidated revenue stood at ~Rs 1,345 crore and Ebitda margin at 47.1% in fiscal 2025, against ~Rs 1,206 crore and 48.9%, respectively, in fiscal 2024. The operating performance is expected to improve, driven by the robust domestic leisure and business travel owing to strong economic activity and traction in international travel. The group owns and operates five hotels and manages another 7 under the seven consolidated entities and 1 franchise hotel, which provides healthy assets as well as geographic diversification. However, the group is exposed to revenue concentration as more than ~70% of revenue comes from 3 properties - Leela Palace Bengaluru and The Leela Palace New Delhi and The Leela Palace Chennai.
Expectation of support from Brookfield Group: SBL benefits from Brookfield group’s ability to exercise control on its financial and liquidity management as well as from its intention to extend support to the entity, if and when needed. Brookfield group, through BSREP III India Holding (DIFC) Ltd continues to holds majority ~75.91% shareholding in SBL post IPO.
Brookfield group has amply demonstrated its financial support towards SBL in the past. Further, BSREP III has also given a Right of First Offer (ROFO) for all hospitality assets being acquired by BSREP III in India to SBL highlighting SBL’s strategic importance to the parent. Recently, Brookfield and SBL have won an award letter from MMRDA for a plot in BKC, Mumbai under a 50:50 JV for mixed development of commercial cum hospitality asset which also demonstrates the importance of SBL to the Brookfield group. Overall, Crisil Ratings expects that SBL will continue to benefit from Brookfield’s global experience in the hospitality segment, its advanced systems and processes, and also derive synergies from Brookfield’s ecosystem.
Significantly improved financial risk profile that is likely to sustain over medium term SBL’s financial risk profile has strengthened significantly in fiscal 2026 post IPO in June 2025. As a result, gearing is expected to improve to below ~0.5x in the medium term, from 1.34x in FY25. Net debt to EBITDA is expected to sustain below ~2.5x in medium term, compared to above 4x in FY25, aided by deleveraging, substantial liquid surplus and EBITDA growth. Company had bank balance of Rs 1,341 crore as on March 31, 2025 (including Rs. 1,252 crore unencumbered) aided by infusion of compulsorily convertible preference shares of ~1,190 crore in fiscal 2025. Further, interest coverage is also expected to improve to over 5 times over the medium term. This is despite the company having sizeable capex plans of ~Rs. 750–800 crore per annum over FY26–FY28. Going forward, maintaining prudent financial discipline and timely execution of capex without cost overruns will remain key monitorables.
Weaknesses: Exposure to cyclicality in the hospitality industry The hospitality sector is susceptible to downturns in the domestic and international economies. Growth in revenue per available room (RevPAR) in business destinations is more sensitive to macroeconomic indicators, such as nominal growth in gross domestic product. On the other hand, leisure destinations are more sensitive to non-economic factors such as terror attacks and health-related travel warnings, as seen during the pandemic. Besides, the RevPAR of premium hotels declines more sharply during downturns in comparison with mid-sized or economy hotels, but operating cost remains high. Thus, cash flow from these properties may remain vulnerable to economic downturns.
Execution risk associated with sizeable capex Schloss group has plans to add ~725 rooms over next 5 years with capex outlay of Rs. 750-800 crore per annum over FY26–FY28 including the outlay towards development of BKC project. Given the substantial capex outlay in the medium term, any delay in project execution or cost overruns could impact the company’s financial risk profile, making timely project execution and cost management a key monitorable. However, comfort can be taken from its extensive experience in the field, sizeable liquidity in hand and support from Brookfield group. |
Liquidity: Strong Liquidity remains strong, backed by Rs. 1,314 crore cash and bank balances as on March 31, 2025, of which Rs. 1,252 crore is unencumbered. Additionally, the company has working capital lines of Rs. 100 crore, with moderate utilisation, and expects to generate cash accruals of Rs. 400–600 crore annually over FY26–FY28. The company’s repayment and capex needs over the medium term (~Rs.750-800 crore capex and Rs. 270–480 crore debt repayment annually) are expected to be comfortably met through internal accruals and refinancing flexibility. Crisil Ratings also understand that Brookfield will ensure that Schloss group maintains adequate liquidity and will support cashflow requirements. Brookfield group support will be a key monitorable. |
Outlook: Stable The business risk profile of the Schloss group will continue to benefit from sustained improvement in occupancy and ARR, coupled with premium positioning of the respective hotel in the geographies. The financial risk profile is expected to improve over the medium term, driven by expected equity infusion and the consequent bolstering of the debt protection metrics. |
Rating Sensitivity Factors Upward Factors
Downward Factors
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About the Group SBL, part of the Brookfield group, owns and operates The Leela group of hotels, a leading luxury hospitality chain in India. The company owns, manages, and operates a portfolio of high-end hotels and resorts across key business and leisure destinations such as Delhi, Bengaluru, Udaipur, Chennai, Jaipur, Gurugram, Hyderabad, Gandhinagar, and Kerala. On May 31, 2024, Brookfield’s holding fund (BSREP III) transferred ownership of five hotel-owning subsidiaries – Schloss Chanakya Pvt. Ltd, Schloss Chennai Pvt. Ltd, Schloss Udaipur Pvt. Ltd, Schloss HMA Pvt. Ltd, and Tulsi Palace Resort Pvt. Ltd (Jaipur hotel) – to SBL, making them wholly-owned subsidiaries of SBL.
About the sponsor fund BSREP III fund which holds 75.91% in SBL is 100% managed by BAM: Brookfield Asset Management which is also the principal investor in the fund. The fund through which the investment is being done, has a fixed tenure of 10 years (with an option for two one-year extensions) with investments typically happening in the first four years. |
Key Financial Indicators - consolidated
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Any other information: Not Applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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Annexure - List of Entities Consolidated
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Annexure - Details of Bank Lenders & Facilities | ||||||||||||||||||||||||
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Criteria Details
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