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MH IPO Offer Opens

The company is looking to expand its presence in the vacations space

Mahindra & Mahindra’s subsidiary and the country’s largest vacation-based company, Mahindra Holidays & Resorts, is looking to expand and to finance that, it will be unveiling its initial public offering (IPO).

In a bid to make extra rooms available in view of an increase in demand for its services, the company is set to float a Rs 192 crore IPO, involving the public issue of 92 million equity shares. This however would exclude the Rs 108 crore offer for sale by M&M.

The issue, opens on June 23 and closes on June 26. The 12-year-old company will be  adding new rooms at its current facilities, greenfield projects and through acquisitions. It is scheduled to use more than Rs 200 crore from IPO proceeds to set up resorts at Tungi (Lonavla) and Theog (Shimla), expand its resorts in Coorg (Karnataka) and Ashtamudi (Kerala) and renovate its property at Ooty.

The company added 19,000 new members in financial year 2009 and numbers are expected to be higher in the current fiscal. A major chunk of the revenues comes from membership fee, which, so far, works out to an average of Rs 2.5 lakh per subscriber.

To sew up the market at various budgetary entry points, the company has launched a number of brands and services. While a travel portal was launched by the company last year, it also introduced the concept of Homestays, launched in London and some parts of India last year, where travelers can stay in properties that are not owned by Club Mahindra  or any of its partners. In effect they belong to people willing to lend their homes for a consideration.

The company has grown its base by a compounded annual general growth rate (CAGR) of 34 per cent over the last five years to over 96,000 members.

However, due to the economic downturn, the company registered a slowdown in the BFSI segment which accounts for a significant chunk of business. It dragged down the incremental growth in subscriber base from 21,000 in financial year 2008 to 19,000 in 2009. Similarly, revenue growth too took a hit with slower growth of 18 per cent in comparison to 5-year CAGR of over 43 per cent and net profit, which was down 6 per cent.

The company has been making good profits 2002 and has registered growth rates in sales and profitability parameters. If one excludes financial year 2009, the company’s revenues and profits averaged 43 per cent and 58 per cent respectively between the financial years 2005-09.

Priced at some 33 times its earnings per share in FY09 at its upper price band, it is on the upper side. Even at the downside, the price to earning multiple is 29, which is more than those of its peers.

The offer opens on June 23 and closes June 26.