Last year, Mahindra Holidays acquired 23.3 per cent stake in Holiday Club Resorts for ₹125 crore.

Going by that, the 64.7 per cent stake now proposed to be acquired for €28 million comes cheap.

The current valuation of Holiday Club Resorts (in euro terms) is at a discount of 37 per cent from last July when Mahindra Holidays acquired the first tranche of 18.8 per cent for €13 million. The depreciation of the euro will also help. At ₹72 a euro now, Mahindra Holidays will be paying about ₹200 crore – that’s less than double in rupee terms for about three times the stake buys last year.

The market though didn’t seem too kicked about the latest deal announcement. After rising about 5 per cent during the day, the Mahindra Holidays stock gave up its gains and ended 0.7 per cent down. This seems to be due to concerns about the debt the company will have to take on to fund the cash acquisition of the fresh stake.

Debt was a worry even during last year’s buy. This did not seem out of place — from less than ₹3 crore as on March 2014, the company’s consolidated debt rose to ₹124 crore as on March 2015.

The debt-to-equity ratio is still comfortable at about 0.17 times, but with cash of just about ₹22 crore, Mahindra Holidays will have to resort to further borrowings to fund the additional stake.

Also, last year, the company does not seem to have benefited much from its acquisition-driven growth strategy — its consolidated profit in 2014-15 slipped about 7 per cent.

The market did not take kindly to the weak performance, and the stock is down nearly 25 per cent over the last year.

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