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M. Ramesh

Chennai, Aug. 5

Mahindra Holidays and Resorts Ltd may have had to shelve its plans to come out with an initial public offering given the prevailing market conditions, but the company is not complaining.

According to its Managing Director, Mr Ramesh Ramanathan, the company can afford to wait until the markets turn robust again, as alternative means of funding its projects have been found.

Under its two brands, Club Mahindra and Zest, Mahindra Holidays has about 85,000 families for timeshare units. Most of them pay the membership fees in equated monthly instalments.

Mahindra Holidays is sitting on a stock of receivables worth about Rs 500 crore. The company has begun to securitise the receivables.

In 2008-09, the company raised Rs 60 crore through this route, from HDFC Bank and Axis Bank. Mr Ramanathan estimates that number could exceed Rs 200 crore.

Banks are comfortable with this method because there is no question of defaults in receivables — if a member fails to pay, the membership is transferred to someone else.

The funds raised are being used for leasing, buying or constructing properties and doing up the existing ones.

If securitisation is a good option, then what did the company want to come out with an IPO for? “Overseas ambitions,” says Mr Ramanathan.

Mahindra Holidays wants to spread its wings across the globe. Sometimes it may have to raise funds locally. Raising funds in overseas markets is easier if the company is listed.

For starters, the company is looking at a location in South Africa and another in Middle East-North Africa for the first two overseas resorts, Mr Ramanathan said.

“There is a tremendous opportunity to cross-sell other products,” Mr Ramanathan said. Mahindra Holidays, however, would only sell products that would enhance the holidaying experience of the customers, he added.

The Club Mahindra brand today has about 80,000 families. Zest, positioned to attract the youthful, short-break takers, has another 5,000. Counting at four members per family, Mahindra Holidays has a clientele of close to 400,000.

The company has about 450 rooms under Club Mahindra and another 100 under Zest.

Mr Ramanathan pointed out that time-shares are inflation-proof — once you pay your subscription and become a member, the holidays cost the same, no matter what the inflation is.

More Stories on : Outlook | IPOs | Resorts & Amusement Parks

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