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Visit us at www.sharekhan.com June 22, 2009
Mahindra Holidays & Resorts
IPO Fact Sheet
Issue details The company will not receive any proceeds from the offer
Issue opens : June 23,2009 for sale of 33.69 lakh shares by the promoters.
Issue closes : June 26,2009
After the issue, the total number of issued shares would
Issue size : Rs254.8-301.1 crore increase to 8.42 crore shares from 7.83 crore shares (dilution
Offer size : 9,265,275 shares, forming 11.0% of 7.53%) at present. Post-issue the shareholding of the
of post-issue shares
promoter group will come down to 83.1% from 93.6%.
Face value : Rs10
Fresh issue of shares : 5,896,084 Shareholding pattern
Offer for sale of shares : 3,369,191 Pre-issue Post-issue
Net issue to public : 9,265,275 No. of shares % No. of shares %
Of which, Promoter
M&M 73,354,833 93.6 69,985,642 83.1
QIB portion : At least 5,559,165 shares
(60%) Others 4,978,855 6.4 4,978,855 5.9
Public - 9,265,275 11.0
Non-institutional portion : Not less than 926,528 shares
(10%) Total 78,333,688 100 84,229,772 100
Retail portion : Not less than 2,779,583 shares Company background
(30%)
Price band : Rs275-325
Incorporated in 1996, Mahindra Holidays and Resorts Ltd
(MHR) is the leading leisure hospitality provider, offering
Objects of the issue quality family holidays on a time-share model to its members.
MHR offers its members the choice of holidaying at any of
The fresh issue of 58.96 lakh shares is aimed at raising
its 27 resorts (11 resorts are owned by the company), for
Rs162.1 crore to Rs191.6 crore (at lower and upper end of
seven days each year, in a season and apartment type of
the price band respectively) for
their choice for 25 years. The company derives its revenues
financing the expansion of some of the company’s from membership fees (sale of vacation ownership), annual
existing resorts and new projects. subscription fees, charges for food and beverages (F&B),
and the use of the other facilities at its resorts. MHR’s
For general corporate purposes. revenues and profits grew at a compounded annual growth
Use of IPO proceeds Cost Utilisation of IPO Remarks
(Rs crore) proceeds (Rs crore)
Ashtamudi (Kerala) 36.8 33.2 Expansion of the existing resort with 66 additional rooms along with a
restaurant, a bar, a conference hall and a swimming pool
Coorg (Karnataka) 16.3 16.3 Expansion of the existing resort, by constructing 34 additional apartments,
another swimming pool and additional facilities
Ooty (Tamil Nadu) 12.2 8.3 Renovation of acquired facility, which will have 90 rooms and two
restaurants, a marriage hall and a swimming pool
Tungi 97.0 80.5 Construction of 158 rooms, a restaurant and a conference room
Theog (near Shimla) 74.7 72.7 A new resort with 150 rooms
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sharekhan ipo flash Mahindra Holidays & Resorts
rate (CAGR) of 51.4% and 116.4% respectively over FY2005- Presence at key holiday locations
08. However, FY2009 was challenging for the company with The company currently has 27 resorts in some of the most
its revenues growing by 11.5% and net profit declining by preferred holiday locations in India (refer list below) and
5% year on year (yoy) despite a 26.2% increase in the number Thailand. These are either owned or leased by the company
of its members. on a long-term basis. These resorts have aggregate of 1,189
Revenue mix apartments and cottages (with ~2,378 rooms). To expand
its portfolio of properties MHR is currently developing a
Travel service
Resorts new resort on 41.64 acres of land at Tungi near Lonavala
and homestays
12.5% 0.3% and on 9.27 acres of land at Theog near Shimla (Himachal
Pradesh). In addition, the company has purchased stretches
Annual of land at various locations: 25.02 acres at Kadapakkam
subscription near Chennai (Tamil Nadu), 0.14 acres at Ashtamudi
12% (Kerala), 20.8 acres at Hyderabad (Andhra Pradesh), 36.4
Sale of
Vacation acres at Coorg (Karnataka), 100.32 acres at Kas
Ownership
(Maharashtra) and 20.42 acres at Varwade (Maharashtra)
75.6%
for developing new resorts. In all, the company intends to
Key positives add 500 rooms to its existing inventory by 2012.
Strong positioning Mixed-use model helps optimise revenues
Due to its strong brand, premium properties and service MHR operates a mixed-use model whereby non-members
standards MHR’s membership enrollments have grown at a have access to unutilised apartments on a per night tariff
CAGR of 32% over the last three years. Thus, the company basis. We believe this enables the company to enhance
has 96,067 members under its belt as on May 31, 2009. revenues through optimum occupancy and sales from
Also, MHR accounts for 72% of the total active members restaurants and other services. Also, the mixed-use model
across the vacation ownership industry in India with RCI. acts as a catalyst for growth by creating an interest in
While its flagship brand, Club Mahindra Holidays, caters membership programme for non-members.
to families to target diverse sets of customers in the
vacation space, the company has in the recent past Strong financials
expanded its offerings under the brands Club Mahindra With a good business proposition and growing portfolio of
Fundays (for corporates), Zest (to target the youth) and holiday locations MHR witnessed a 33.9% CAGR in the
Homestays (primarily to cater to overseas travelers). The number of members over FY2006-09. Driven by a robust
diversified portfolio and strong brand recognition put the growth rate in memberships the revenues and profits of
company in a dominant position in the vacation ownership the company showed a healthy growth of 51.4% and 116.4%
industry which will help it to grow its member base and respectively over FY2005-08. However, despite a 26.2%
drive its revenues and profits at a good pace. increase in the memberships in FY2009 the revenues grew
Diversified offerings
Club Mahindra Holidays The company's flagship holiday product was launched in 1997. It enables the company’s
91,997 members to holiday at any of its 23 resorts for seven days each year (for 25 years).
Zest The new offering by MHR is targeted at young urban families and based on the concept
of short breaks. The company currently has 4,070 Zest vacation members.
Club Mahindra Fundays The product is targeted at corporate customers and is based on point systems for
tenure of ten years. The corporate members can use these points to offer family
holidays to their employees.
Clubmahindra.travel A one-stop shop for all travel related services, including holiday-planning, ticketing and
other related services. The website was certified by IATA in 2008.
Mahindra Homestay The product was launched in 2008 for overseas travelers wishing to experience the real
India. Mahindra Homestay has built a pan-India network of 71 Homestays in cities and
various tourist destinations.
Sharekhan 2 June 2009
sharekhan ipo flash Mahindra Holidays & Resorts
by only 11.5% and the net profit declined by 5%, reflecting Valuations
the tough time faced by the leisure industry in H2FY2009. Our rough estimates suggest that at the lower and upper
MHR enjoys a healthy operating profit margin (OPM) of band of the issue price the stock would discount its FY2010E
26.2% (however, the same has come down from 33.9% in earnings by 23.9x and 28x respectively and its FY2011E
FY2008). The business has high shareholder returns with a earnings by 19.5x and 23x respectively. Thus, we believe
return on net worth (RoNW) of 47% for FY2009. The return that despite good financials and strong visibility in business,
on capital employed (RoCE) at 18% is also at reasonable the valuations appear to be a little high, which would limit
levels. Moreover, the business generates strong cash flow the upside for an investor.
from operations (Rs158.4 crore for FY2009). However, as
the company is expanding, it did not have any free cash
flows for FY2009. We believe that while the company’s OPM Existing properties
is likely to be maintained at a good level, the RoNW and Location Number of Owned / Leased
apartments/ cottages (long term)
RoCE are likely to drop to ~30% and ~15% respectively in
FY2010 as a result of the equity issuance (ie the initial Ashtamudi, Kerala 26 Owned
public offering). Goa, Goa 205 Owned
Binsar, Uttaranchal 36 Owned
Key concerns Coorg, Karnataka 188 Owned
Current macro environment may affect new member Manali, Himachal Pradesh 33 Owned
additions Munnar, Kerala 112 Owned
Kumbalgarh, Rajasthan 68 Owned
The company’s revenues and profitability are highly
Puducherry, Puducherry 125 Owned
susceptible to the slowdown in the leisure and travel industry
Manipur Villa, Binsar, Uttaranchal 22 Owned
against the backdrop of the current macro environment.
Thus, the job uncertainties and dampened consumer Ooty, Tamil Nadu 90 Owned
sentiments may affect the new member additions for the Thekaddy, Kerala 32 Owned
company, as leisure spends are the first to be avoided in Auli, Himachal Pradesh 10 Leased
times of income uncertainties. Such pressures may require Bangkok, Thailand 6 Leased
the company to reduce its membership fees or offer Corbett, Uttaranchal 4 Leased
discounts for various packages which, in turn, might affect Dharamshala, Himachal Pradesh 23 Leased
its profitability. Kodaikanal, Tamil Nadu 11 Leased
Mussoorie, Uttaranchal 19 Leased
Bad debts may increase Pattaya, Thailand 6 Leased
About 94% of the company’s existing members are paying Ooty, Tamil Nadu 15 Leased
their membership fees on an installment basis. We believe Masinagudi, Tamil Nadu 20 Leased
the current business environment has increased the Yercaud 40 Leased
potential of bad debts, especially so considering that the Naukutchiataal 31 Leased
company has Rs482.6 crore debtors in its balance sheet as Shimla 67 Leased
on March 31, 2009 (debtors days of 442 days). Total 1099
Sharekhan 3 June 2009
sharekhan ipo flash Mahindra Holidays & Resorts
Financials
Profit & Loss account (consolidated) Rs (cr) Balance sheet (consolidated) Rs (cr)
Particulars FY2006 FY2007 FY2008 FY2009 Particulars FY2006 FY2007 FY2008 FY2009
Net revenues 152.7 232.3 352.7 393.2 Sources of funds
Total expenditure 112.2 162.0 233.2 290.0 Equity capital 28.4 28.4 76.4 77.0
Operating profit 40.6 70.3 119.5 103.2 Reserves & Surplus 14.9 47.3 66.6 118.8
Other income 4.0 9.0 24.5 48.9 Net worth 43.3 75.7 143.0 195.8
EBIDTA 44.6 79.3 144.0 152.1 Secured loan 26.8 6.0 20.1 24.7
Interest & financial charges 3.3 3.6 3.3 7.0 Total loans 26.8 6.0 20.1 24.7
Depreciation 7.8 8.9 11.3 16.8 Advances towards 226.3 324.2 482.5 641.0
Adjustments for restatements 0.7 -0.3 -0.2 -0.1 membership facilities
PBT 32.8 67.1 129.6 128.4 Total 296.4 405.9 645.6 861.5
Total tax expense 12.8 24.6 45.6 48.6 Application of funds
Profit after tax 20.0 42.5 84.0 79.8 Gross block 191.7 225.7 273.4 429.3
Less: Depreciation 30.7 38.3 47.9 64.1
Net block 161.0 187.4 225.5 365.2
Expenditure pending allocations 0.8 2.9 6.0 8.5
Valuations Capital WIP 1.4 9.8 39.0 42.8
Particulars FY2006 FY2007 FY2008 FY2009 Investments 0.0 5.9 0.0 0.0
EPS (Rs) 7.1 15.0 11.0 10.4 Current assets 180.5 271.8 476.6 587.1
Less: Current liabilities -38.2 -51.8 -78.0 -112.6
PER (x) at lower band 39.0 18.4 25.0 26.5 and provisions
PER (x) at higher band 46.1 21.7 29.6 31.3 Net current assets 142.3 220.0 398.7 474.5
ROE (%) 55.9 71.5 76.8 47.1 Net deferred tax -9.2 -20.2 -23.6 -29.5
ROCE (%) 14.4 20.1 25.3 18.0 Total 296.4 405.9 645.6 861.5
The "views" expressed in this report are our views only and have been arrived at after analysis of the public offering
details. This is not a recommendation under our "Stock Idea" category. It may/may not be included in the Stock Idea by
our analysts at a later date.
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