Lemon Tree Hotels Limited has informed the Exchange regarding 'Termination of Master Service Agreement by Berggruen Hotels Private Limited (material subsidiary of the Company)'.
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On the reaction day the stock moved 1.1 pts less than Nifty Smallcap 250 and 0.8 pts less than its Hotels & Resorts peers, over the same two closes: a difference in percentage points, not a measure of what the filing did.
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Lemon Tree Hotels' material subsidiary Berggruen Hotels Private Limited (BHPL) has terminated a Master Service Agreement with three entities—CS Hospitality & Management Services, Green Apple Hotels & Resorts, and Nestor Hotels Private Limited. The agreement, dating back to May 23, 2010, was for operating the 'Keys Select Hotel Nestor by Lemon Tree'. The termination was initiated by BHPL due to non-payment of outstanding management fees and deposit amounts by the counterparties. The company has clarified that this termination will have no significant financial impact on Lemon Tree Hotels.
The termination appears benign for shareholders as the company explicitly states no significant financial impact. The move actually protects the company from non-paying counterparties, though it does mean losing management fee revenue from one hotel property.