MHRILNSEFebruary 9, 2023

Mahindra Holidays & Resorts India Limited

9,188words
39turns
6analyst exchanges
2executives
Management on call
Kavinder Singh
MANAGING DIRECTOR AND CHIEF EXECUTIVE OFFICER
Sujit Vaidya
CHIEF FINANCIAL OFFICER V
Key numbers — 40 extracted
70%
Indian hotel industry recorded its best performance since the pandemic began with an occupancy of 70% and ARRs exceeding INR 7,000. The budget 2023 indeed has been a very good news for our sector. As
INR 7,000
ecorded its best performance since the pandemic began with an occupancy of 70% and ARRs exceeding INR 7,000. The budget 2023 indeed has been a very good news for our sector. As you know that the tourism
2.8 lakh
extremely resilient versus traditional hospitality businesses. We have a large member base now of 2.8 lakhs, who have a strong desire to travel. And now we are seeing a track record of increasing spends a
INR 377 crore
olment. And because of the higher member additions, our operating cash in this quarter went up to INR 377 crores this quarter, sorry, not this quarter but for 9 months FY23, up from INR 252 crores for the 9-mo
INR 252 crore
er went up to INR 377 crores this quarter, sorry, not this quarter but for 9 months FY23, up from INR 252 crores for the 9-month period FY22. You will also appreciate our business model has a cumulative effect
INR 60 crore
And you may have noticed in the investor deck, we have shared the information that we have added INR 60 crores to our deferred revenue on a quarter-on-quarter basis and INR 152 crores to the deferred profits
INR 152 crore
mation that we have added INR 60 crores to our deferred revenue on a quarter-on-quarter basis and INR 152 crores to the deferred profits, which is net of deferred costs in the 9MFY23 versus the same period las
INR 336 crore
hat we had substantial top line and operating profit growth to deliver the highest ever income at INR 336 crores, which is 18% up on a Y-o-Y basis and the highest ever EBITDA at about INR 99 crores, which is 1
18%
p line and operating profit growth to deliver the highest ever income at INR 336 crores, which is 18% up on a Y-o-Y basis and the highest ever EBITDA at about INR 99 crores, which is 17% on a year-on
INR 99 crore
r income at INR 336 crores, which is 18% up on a Y-o-Y basis and the highest ever EBITDA at about INR 99 crores, which is 17% on a year-on-year basis. Our EBITDA margins have expanded compared to pre-pandemic
17%
es, which is 18% up on a Y-o-Y basis and the highest ever EBITDA at about INR 99 crores, which is 17% on a year-on-year basis. Our EBITDA margins have expanded compared to pre-pandemic levels and sta
29.3%
ar basis. Our EBITDA margins have expanded compared to pre-pandemic levels and stand at a healthy 29.3% in Q3, which is up 300 basis points. And for the 9 months period, the EBITDA margin stand at 28.4
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Guidance — 20 items
Kavinder Singh
opening
“There will be improved discoverability of destinations through the unified app that was announced.”
Kavinder Singh
opening
“And we are obviously watching for many, many details that will come out as we move forward, and we will be looking at opportunities to participate in the PPP opportunities that may come.”
Kavinder Singh
opening
“With this, we remain on track to achieve our guidance of 5,500+ rooms by FY '25.”
Kavinder Singh
opening
“Most likely, in this quarter, we will be breaking ground subject to one last final approval for a 236-key greenfield resort at Ganpatipule overlooking the beautiful Arabian Sea.”
Kavinder Singh
opening
“PPP projects, I mentioned, we have done a soft launch at Janjehli in Himachal Pradesh, and we will be able to get it live by April.”
Kavinder Singh
opening
“We have also been awarded the Harihareshwar project by MTDC, Maharashtra.”
Kavinder Singh
opening
“We are very confident, next year 35% of our energy requirement would be met through solar energy.”
Kavinder Singh
opening
“Under the Project Haryali, Mahindra Haryali, we have planted 16,000 trees in 9MFY23, and we have completed the mark of 0.5 million trees since we started this initiative.”
Kavinder Singh
opening
“Therefore, we expect a much higher top line growth.”
Kavinder Singh
opening
“Our data science and analytics capabilities are helping us predict behavior as well as target higher occupancies at our resorts.”
Risks & concerns — 5 flagged
During the quarter, the ongoing geopolitical situation has definitely led to pressure on Finnish economy, which has actually been affected by decade high inflation levels, energy crisis as well as the collapse of its housing market there.
— Kavinder Singh
So our real challenge is to get the right person on the table.
— Kavinder Singh
To be honest, it's a bit of a hypothetical question, so very difficult to answer what one would do.
— Kavinder Singh
When we consider from an ROCE perspective, this business can give a tremendous drag on the consolidated ROCE.
— Shivan Sarvaiya
Because every year, this drag will keep on coming.
— Bimal Sampat
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Q&A — 6 exchanges
Q
Congratulations for good set of numbers. Sir, just quickly couple of questions. Resort income, very healthy growth, 30% year-on-year. Sir, you already highlighted 16.7% growth in room nights. Can you provide some more color like, what is the price increase we have taken? And are members is the -- are the number of members who are having F&B within the resorts higher than the room night occupancy growth...
Kavinder Singh
Okay. So Himanshu, the question is a very, very relevant and a good one. You see what is happening is that since our base has expanded in terms of the room nights, and that is what I was highlighting that on the occupied room night, we had 16% growth. Now what happens is when the occupied room nights grow, the kicker comes in, in the overall resort revenues. But apart from that, you may have seen the income has grown by 30%, which means members are spending more on per available room night basis. And that is something that we have noticed. People are spending more because we have created durin
Q
I have two sets of questions. One for HCR and the other is for the standalone operations. I’ll start with the standalone. Suppose in case if our member additions over the next 2 years with whatever strategy that we are trying and we have been trying very well of course, market should also respond a little bit in your favour. If it doesn’t succeed us getting more than 4,000, 4,500 per quarter or maybe 15,000, 17,000 per year, do we still see beyond FY25 the room additions continuing, which we would hope, but I would want your broader thought. And of course, nothing is finalized. I just want a b
Kavinder Singh
Yes. To be honest, it's a bit of a hypothetical question, so very difficult to answer what one would do. As far as I'm concerned, if I look at all the factors, whether it is the budget announcements made, whether it is the fact that even today, we see huge momentum despite adding 1,200-1,300 rooms over the last 3 years, we are seeing our occupancy is not dipping at all in fact is increasing. So we believe that leisure is a mega trend. And as the leisure travel, particularly travel with extended families, friends increases, the need for inventory is probably a foregone conclusion. Let's come to
Q
Sir, one question around HCR. Sir, so what I wanted to know is that when we look at HCR, there has always been tremendous volatility in its earnings when we see it on a quarter-on-quarter basis and even on a yearly basis. There are certain quarters where we feel that it's started breaking, even, started making profits and then suddenly, it goes back in losses for a considerable period of time. So on a broad basis, what is the management thought process here to normalize and stabilize that business? And we had -- while this asset was acquired, it was thought that it would be a funnel basically
Kavinder Singh
Yes. So I think it's important to understand the HCR business model. HCR business model definitely has a built-in seasonality. That's without a doubt, and we know about it. And the seasonality comes from their holidaying season. And because the business model has certain level of fixed cost, whether it is the hotel rentals because the hotels are on rent, they don't own the hotels or because of the other fixed costs. So there is a seasonality, which reflects in the profit performance. Actually, if you recall, we had hit a EBITDA of about EUR 12 million, which is just after us taking over. Even
Q
Congratulations for a good set of numbers. Sir, I had just one question. We have such a good customer base, so many resorts, so many rooms. And our footing is more into providing excellent experience to our customers. And when we have excellent travel tech companies in the market, why can't we outsource this work to them and probably get more valuable insights as to how to tap into our rich customer base and make our business even more stronger. Any thought on that?
Kavinder Singh
Yes, there is an idea internally that we are working on. I think you should see some action on that part. How can we tap into our member base and actually, so let me give you a bit of a flavor. This Horizon idea actually comes from there that how can we use our member base and monetize them more by creating this Horizon product, which we have done. It is showing good sign. I think I have talked earlier about Club M Select. This is the product which actually allows them to buy this membership and this membership is also growing internally. We are noticing that. V te w r ClubMahindra We are seei
Q
The question is mainly related to this HCR. Now since we are having this debt, how, I mean when do you think this debt will be cleared with their own cash flows? And if there is an option -- Hello.
Kavinder Singh
Yes, we are listening. Yes, so if there is an option, whether we can pump in money from here to reduce the debt because I mean there is a rupee depreciation plus interest rates are high there also. So does it, I mean how long it is going to take? Because every year, this drag will keep on coming. So instead of that onetime or we can sell part of the stake, get money and repay the debt, have you thought on those lines? Actually, whatever you are seeing was one of the reasons we paid off EUR 25 million of debt in July when the euro INR ratio had come down to INR 79.91. So that is the lowest that
Q
Thank you very much for patient listening. As I always mentioned, we in management are very conscious of your feedback and the suggestions that come. We make note of all of them. You have seen that how we have increased our disclosures, including this time, the upgrades, deferred profit, etc. So there is a lot of visibility on the way the business model works. We do our best to explain the business model and the work that we are doing. We remain consistent in what we say and what we do. And this is something that is valuable. These interactions with you are very valuable to us, and we remain o
Management
Speaking time
Kavinder Singh
15
Moderator
8
Himanshu Shah
5
Dhruvesh Sanghvi
3
Sujit Vaidya
2
Shivan Sarvaiya
2
Ankit Kanodia
2
Bimal Sampat
2
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Opening remarks
Kavinder Singh
Good evening, everyone, and a very warm welcome to our Quarter 3 earnings call. On the call with me today, we have Mr. Sujit Vaidya, our CFO. I'm sure you have had a chance to look at our results and investor presentation, which has been uploaded yesterday both on our website as well as on the stock exchanges. I think what I will do is give you a quick update on the industry, which -- some of you who are tracking actively would know, so it might be a repetition. But we have seen in leisure, there is a significant rebound, as you can see in the past two quarters. And all of them, all the markets, we are seeing have outperformed their pre-pandemic level occupancies and ARRs. In fact, in November 2022, the Indian hotel industry recorded its best performance since the pandemic began with an occupancy of 70% and ARRs exceeding INR 7,000. The budget 2023 indeed has been a very good news for our sector. As you know that the tourism sector has been now made to go on a mission mode, which is ac
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