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Saturday, June 20, 2009

IPO Review- Mahindra Holidays and Resorts

When hoteliers and tour operators are struggling with the combine effect of recession and swine flu, Mahindra Holidays and Resorts India Ltd (MHRIL), a part of Mahindra Group, is coming up with Initial Public Offer (IPO) to raise resources to fund its existing and expansion projects in the country.

“We were not affected by recession at all. In fact we have made some significant growth during this period when other industries have suffered. The fact that we were not hit with the wrath of recession is because our company does not depend on occupancy level but depends on membership fee, an annual subscription fee (ASF) and revenue we generate from our resorts, which is increasing. In 2005 we had 28,491 members which has increased to a staggering 92,825 during this year, which is a good news in the wake of global downturn,” Ramesh Ramanathan, Managing Director, said in a press conference in Delhi, on Saturday.

The group has fixed the price band between Rs. 275 to 325 per equity share for an IPO offering of 92,65,275 shares. The Issue opens on June 23 and closes on June 26, 2009. The Issue comprises a fresh issue of 58,96,084 equity shares and an offer for sale of 33,69,191 equity shares by Mahindra and Mahindra Limited (the “selling shareholder”).

According to the company MD, “We have a pan-India presence and with increasing popularity of our resorts and increasing membership we are worriless about the future of our company. We are a zero debt company. We are also eyeing expansion by making our presence in Tungi (near Lonavala) and at Theog (near Shimla) in 2009-10. We are excited about these projects and are hoping that both projects come out well. Also, we are planning to introduce a budget holiday product in coming time to diversify our presence in India.”

He added, “In terms of geographical expansion we are planning to roll out Mahindra products in tier-II and tier-III cities. Also, we have certain plans to launch camp sites (tented accommodation) near our resorts to extend our reach to teenagers, adventure enthusiasts and for those who want to be felt in the laps of nature. Along with all other facilities we are also planning to promote our spa brand ‘Svaastha’ in cities.”

The Mahindra Holiday Group has a total of 27 resorts out of which 11 are fully owned by the Group, 12 are on a long lease and 5 resorts on short lease. These 27 resorts offer a total of 1,261 apartments. The Group boasts to offer complete family holiday experience to its members. Family package includes services like restaurants, bars, swimming pool, Ayurvedic spas, fun activities for kids with specially trained employees, fun dinning etc. The Group also boasts of its 2 resorts with 5 star accreditation by department of Tourism, Government of India and its seven RCI Gold crown resort...

via FE

IPO Analysis - Mahindra Holidays & Resorts India

Very costly

Offer price high as industry will continue to suffer from economic slowdown in the near term and will remain plagued with customer dissatisfaction

Mahindra Holidays & Resorts India is a leading leisure hospitality provider in India. The company provides family holidays primarily through vacation ownership memberships. Its members can choose to stay and holiday at resorts in a range of holiday destinations for a pre-determined number of days in a year for a fixed number of years.

Currently, Mahindra Holiday & Resorts has 11 owned resorts with 937 cottages/apartments, 12 resorts with 252 cottages/apartments on long-term lease, and five with 72 cottages/apartments on short-term lease (less than two years). Of the long-lease resorts, two resorts are in Thailand. Currently, the occupancy is 75%, of which 6% are non-members.

Club Mahindra is the flagship product. Started in 1997, Club Mahindra Holiday membership entitles members the choice of holidaying at any of its 23 resorts for seven days each year in a season and in an apartment type of their choice for 25 years. The membership is divided into four seasons: Purple, Red, White and Blue. In addition, its members can choose to access a range of resorts globally through the company's affiliation with Resort Condominiums International (RCI). The company has 91,997 Club Mahindra Holiday vacation ownership members end May 2009.

Zest, based on the concept of short breaks, was introduced in November 2006, and is targeted at young urban families. The Zest member is entitled to six days of holidays every year within the allotted season, Verve, Buzz and Pep, at any Zest resort for a membership period of 10 years. Currently, five resorts have been earmarked for Zest. The company had sold 4,070 Zest vacation ownership memberships end May 2009.

Club Mahindra Fundays, introduced in October 2006, is targeted at corporate customers. The scheme is based on point system, where different season and apartment combinations are valued at points per day as specified from time to time. A corporate customer purchases a specific number of points that are credited to its account every year of the 10-year term of the membership. A corporate member may offer family holidays to its employees. The company had sold 20,16,018 Club Mahindra Funday points end May 2009.

In July 2008, Mahindra Homestays was launched to market Indian Homestays to overseas travelers wishing to experience the real India by lodging with a host family in India. In April 2009, Mahindra Homestays began promoting homestays to Indian customers. A homestay provides no more than eight rooms to in a private home, run by the homeowner. The company had approximately 71 homestays affiliated with Mahindra Homestays end May 2009.

The revenue model is as follows: Mahindra Holiday & Resorts takes membership fee of Rs 250000. This is split into non-refundable admission fee of 60%, i.e., Rs 150000, and the balance 40% is recognised equally over 25 years. The member is also charged annual subscription fees for maintenance of properties. Currently this subscription fee is close to Rs 8000 and is adjusted to the Consumer Price Index.

The proceeds of the issue, net of offer for sale and funds for corporate purposes, will be utilised to upgrade existing facilities and construct new resorts, thereby adding 408 new rooms/apartments.


  • Has a strong parentage of the Mahindra group, which is among the top 10 industrial houses in India. Club Mahindra has the highest brand equity among timeshare companies in India. In terms of market share, accounted for 72% of the total active members across the vacation ownership industry in India with Resort Condominiums International (RCI) up to end May 2009.
  • The number of memberships including all brands had a CAGR of about 34% over the last four years from 2,8491 members end of the fiscal ending March 2005 (FY2005) to 92,825 members end FY 2009 and further to 96,067 members end May 2009. The number of members for Club Mahindra had a CAGR of 33% over the last four years from 28,491 members end FY 2005 to 88,998 members end FY 2009 and further to 91,987 members end May 2009.


  • Has 1,261 apartments/cottages, meaning it can serve 63,050 (1261x50 weeks) members if all its cottages are occupied. However, there are 96,067 members. As per the management, of these, about 63,000 members are eligible for vacation. The logic being that members who have chosen EMI payment (94% of the new members) would be eligible for vacation only 12-18 months from the date of membership. Nevertheless, there is not enough capacity to properly service all its members. The holiday traffic would not be throughout the year but during specific periods. This compounds the unavailability problem. This may lead to dis-satisfaction of members. Currently, there are 105 consumer cases pending.

Though new members are being added, the reputation of the business is not encouraging. The vacation ownership industry in India has suffered from loss of consumer confidence by virtue of inappropriate business practices by certain companies, resulting in a general disgruntlement against the vacation ownership industry.

Sales grew 11% to Rs 393.19 crore in FY 2009 as against more than 50% growth in earlier years. Net profit dipped 5% to Rs 79.80 crore as against close to 100% growth in the earlier years. The new member addition has also seen a dip in FY 2009 due to economic slowdown.


At the price band of Rs 275 – 325, PE works out to 28.9 – 34.2 times on consolidated FY 2009 EPS of Rs 9.5, The market capitalisation to sales ratio comes to about 5.9 – 7 times, whereas that of the hotel Industry on a trailing 12-month (TTM) basis is 2.4 times. Thus, the offer price is very high.



Weekly Watch - June 20 2009

Weekly Watch - June 20 2009

Fuel price rise unlikely if crude remains below USD 70

Petroleum Ministry may not hike fuel prices as long as the average crude rates is below USD 70 a barrel, reports Economic Times.

This was noted by petroleum minister Murli Deora who said that there may not be a hike if the (average) price of crude doesn`t go above USD 70 a barrel. ``We are working on a solution to not increase prices,`` he added.

Oil price has doubled from USD 36 a barrel in January to about USD 70 to USD 72 a barrel now in the global markets.

Earlier this week, the oil minister had said rising crude prices was a `serious concern` and raising petrol and diesel prices was on cards.

Sensex ends strong

The Sensex wrapped the day on a strong note led by capital goods, realty, metal and IT stocks. It opened with a gain of 56.45 points, at 14,321.98 on Friday following good global cues and continued to trade in the positive terrain in the mid noon trades. Later the index erased all its gains and fell into the negative as profit booking sets in. It traded in the negative for a short period touching a low of 14,179.77. However the index bounced back into the positive zone on sustained buying interest seen in frontliners, touching a high of 14,559.08 and positive opening of European markets.

BSE Midcap and Smallcap index index rose 1.68% and 0.82% respectively.

Among the sectoral indices, BSE Capital goods surged 4.58%, Realty gained 3.13%, Metal and IT rose over 2% each, Bankex and Power moved up over 1% each.

European stocks rose trimming the Dow Jones Stoxx 600 Index`s biggest weekly drop since March, as European union leaders said the region is on course for a sustainable economic recovery. UK`s benchmark index FTSE 100 gained 70.85 points, or 1.66%, to trade at 4,351.71. French benchmark index CAC 40 rose 34.94 points, or 1.10%, to trade at 3,228.59 and Germany`s benchmark index DAX lost 4.43 points, or 0.09%, to trade at 4,843.24. (4.15 p.m., IST)

Asian stocks rose, paring the MSCI Asia Pacific Index`s biggest weekly decline since March, as better-than-estimated US economic reports boosted the dollar and Goldman Sachs Group upgraded Japanese banks. Japanese benchmark index Nikkei gained 82.54 points, or 0.85%, to end at 9,786.26.Hong Kong`s Hang Seng index jumped 144.27 points, or 0.81%, to close at 17,920.93 and China`s Shanghai Composite climbed 26.59 points, or 0.93%, to settle at 2,880.49.

The Sensex ended the day with a gain of 256.36 points, or 1.80% at 14,521.89 after touching a high of 14,559.08 and a low of 14,179.77. The broad-based NSE Nifty climbed 62.20 points, or 1.46% at 4,313.60 after hitting a high of 4,326.20 and a low of 4,206.70.

Leaders in the 30-share index were Tata Steel (5.85%), Larsen & Toubro (5.71%), Tata Motors (5.08%), Reliance Energy (5.08%), Jaiprakash Associates (4.68%), and Reliance Capital (3.90%).

On the other hand, NTPC (2.20%), Tata Power Company (1.06%), ACC (1.02%), Mahindra & Mahindra (0.55%), Sun Pharmaceutical Industries (0.24%), and Oil & Natural Gas Corporation (0.23%) were the major losers in the Sensex.

Overall market breadth was mixed. Out of the total 2,704 stocks traded at BSE, 1,345 advanced, 1,293 declined while 66 remained unchanged.

FIIs pull out Rs 1,700 cr from Indian stock mkts in a week

Foreign Institutional Investors
(FIIs) on Friday pulled out a net Rs 29 crore from the Indian stock markets, taking their total outflow during the week to nearly Rs 1,700 crore.

In today's trade, FIIs were gross purchasers of shares worth Rs 1,848.44 crore, while they sold equities valued at Rs 1,877.52 crore resulting in a net sell of Rs 29.08 crore, according to the provisional data available with the Bombay Stock Exchange.

During the week, the overseas investors have pulled out nearly Rs 1,700 crore from the Indian stock markets, as per the latest data available with the market regulator Securities and Exchange Board of India (SEBI).

However, domestic institutional investors continued their investment in the stocks of Indian companies and in today's trade pumped in a net Rs 413.20 crore.

Besides, proprietors and non-resident Indians (NRIs) were also enthusiastic about the equity market and purchased shares worth Rs 89.65 crore and Rs 0.10 crore respectively, the BSE data shows.

Meanwhile, brokers, on behalf of their clients, followed FIIs trend and sold shares worth Rs 182.47 crore.

The BSE's benchmark index Sensex, composed of 30 bluechip stocks, today gained 256 points or 1.8 per cent to close at 14,521.89 points.

Inflation or Deflation

Inflation or Deflation

FIIs continue selling

Outflow of Rs 515.90 crore on 18 June 2009

Foreign institutional investors (FIIs) sold shares worth a net Rs 515.90 crore on Thursday, 18 June 2009, higher than Rs 226.60 crore on Wednesday, 17 June 2009.

FII outflow of Rs 515.90 crore on 18 June 2009 was a result of gross purchases Rs 2,138.40 crore and gross sales Rs 2,654.30 crore. The BSE Sensex lost 257.31 points or 1.77% to 14,265.53 on that day.

FII inflow in June 2009 totaled Rs 4,446.50 crore (till 18 June 2009). FII inflow in calendar year 2009 totaled Rs 25,765.90 crore (till 18 June 2009).

There are a total of 1665 foreign funds registered with the Securities & Exchange Board of India (Sebi).

India Strategy, IRB Infrastructure Developers, Sadbhav Engineering, Axis Bank, Jagran Prakashan, Jubilant Organosys

India Strategy, IRB Infrastructure Developers, Sadbhav Engineering, Axis Bank, Jagran Prakashan, Jubilant Organosys

India Strategy - June 19 2009

India Strategy - June 19 2009

Canara Bank

Canara Bank

Sterlite Industries

Sterlite Industries

Weekly Wrap - June 20 2009

Weekly Wrap - June 20 2009

Auto Ancillaries

Auto Ancillaries



Reliance Industries

Reliance Industries

Asian markets rebound on Wall Street retrieval

Snaps four days losing streak as economic revival brightens

Stock market in Asian region snapped its four days losing streak on Friday, 19 June 2009, as investors decided to switch over to the buying mode again following a series of encouraging economic data from the U.S. overnight which took Wall Street higher. Most of the regional markets tried to come off from their recent losses as a section of participants choosing to lighten commitments ahead of the weekend.

On Wall Street, financials helped two of three major indices in recording modest gains after a slate of somewhat improved economic data and remarks from Treasury Secretary Tim Geithner on the proposed financial system overhaul. The Dow Jones Industrial Average finished up 58.4 points, or 0.7%, to 8555.60, while the S&P 500 was higher by 7.66 points, or 0.8%, at 918.37. The Nasdaq Composite, however, was just slightly lower, down 0.34, or 0.02%, at 1807.72.

In the commodity market, crude oil rose for a third day on speculation that fuel demand will recover as the global economy emerges from its slump.

Crude oil for July delivery was at $72.25 a barrel, up 88 cents, in electronic trading on the New York Mercantile Exchange at 11:55 a.m. London time.

Brent crude for August settlement was at $71.82 a barrel, up 76 cents, on London’s ICE Futures Europe exchange at 12:14 p.m. London time.

Gold, little changed, headed for the longest weekly declining streak in two months as the dollar rallied, eroding demand for the metal as a haven investment. Gold for immediate delivery was at $935.60 an ounce at 11:54 a.m. in London. The metal is heading for a third weekly drop, the longest declining streak since 17 April 2009.

In the currency market, it was rather a quiet today as major pairs remain confined in tight range in general except is USD/JPY which extends yesterday's rebound and reaches as high as 96.75 so far. Aussie is generally higher today following recovery in Asian stocks but the strength is so far mild. The economic calendar is rather light today and markets will likely continue to stay in familiar range to close the week.

The Japanese yen softened against greenback on Friday. The Japanese currency quoted at 96.75 against greenback.

The Hong Kong dollar was trading at HK$ 7.7502 against the dollar. Actually The Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.

In Sydney trade, the Australian dollar climbed against greenback on Friday, getting a boost from better-than-expected U.S. economic data that pointed to a possible recovery among manufacturers. The Aussie was quoted at 80.30 cents against the greenback.

In Wellington trades, the NZ dollar ended at US63.85c, up from US63.02c yesterday. The New Zealand dollar ended the week pretty close to where it started it even though the central bank tried to talk the currency down.

According to TD Securities senior strategist Annette Beacher, another cut to the Official Cash Rate (OCR) would be a more effective way for the Reserve Bank to weaken the Kiwi dollar. Beacher said that while the US dollar's weakness accounted for some of the Kiwi's strength, even on a trade weighted index (TWI) basis the New Zealand currency was overbought

The Taiwan dollar strengthened against the greenback. The Taiwan dollar gained against the US dollar as it was trading higher at NT$ 32.8780, up by NT$ 0.0260 from Thursday’s close of NT$32.9040.

Coming back in equities, Asian markets ended broadly higher, as financials advanced in China after the country opened the door for new share listings, while chipmakers gained on upbeat industry data.

In Japan, the stock index surged with strong gains in financials, miners, and exporters after an overnight rally on Wall Street on reassuring U.S. jobs and manufacturing data, firmer commodity prices, and the US dollar’s advance against the yen. The Nikkei 225 Stock Average index climbed up 82.54 points, or 0.85% to 9,786.26, while the broader Topix index rose 7.76 points, or 0.8% to 919.

On the economic front, in the outcome of minutes from the May 21 and 22 monetary policy meeting, the Bank of Japan board member revealed that the policy move that allowed foreign debt to be used as collateral could possibly become a permanent condition. The minutes also indicated that the continuation of the unusual measures would depend on the response of the markets. The board expects that private consumption could weaken further, and that it must be vigilant against a decline in inflation expectations and volatility in long-term rates.

At the meeting, the board unanimously decided to maintain the uncollateralized overnight call rate at 0.1%. The central bank also expanded the range of eligible collateral to ensure financial market stability by further facilitating money market operations.

In Mainland China, stock markets endured gains for third straight day, driving the benchmark index to a 10-month closing high, with strong gains in financials after the securities regulator approved the nation's first initial public offering (IPO) since September and the World Bank reinforced the belief that the economy is recovering and Premier Wen Jiabao reiterated the government won’t tighten lending conditions.

The Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, jumped 0.93%, or 26.58 points, to 2,880.49, while the Shenzhen Component Index added 0.8%, or 90.66 points, to 11,242.29.

In Hong Kong, the stock market climbed, snapping four days of loosing streak, with broad based gains across the board, thanks to a recovery on Wall Street after reassuring U.S. jobs and manufacturing data boosted hopes for a global economic recovery.

The Hang Seng Index leaped 144.27 points, or 0.81%, to 17,920.93, meanwhile the Hang Seng China Enterprise Index jumped 87.54 points, or 0.84% to 10,509.85.

In Australia, the stock market snapped four days of losing streak, thanks to a recovery on Wall Street and firmer commodity prices. Shares of energy, miners and materials led the rally on the back of rebound in base metal and crude oil prices. Meanwhile financials finished higher on tracking U.S. peers after brokerage houses upgrade outlook for US financials. Industrials and healthcare shares were also in above the line on bottom fishing following four days of sell off.

At the closing bell, the benchmark S&P/ASX200 index surged 7.50 points, or 0.19%, to 3,899.6, while the broader All Ordinaries spurted 7 points, or 0.18%, to 3,894.4.

On the economic front, the Reserve Bank of Australia data showed that Australians' credit card balances fell for the first time since records began 14 years ago. Consumers collectively spent A$17.376 billion, or 7.5 percent less, on their credit cards in April than in the previous month. RBA's monthly bulletin says the major banks' average net interest margin (NIM) for their Australian operations was nine basis points higher than in the previous half in the half-year to March 2009.

In New Zealand, benchmark index dipped down on Friday to end the week in the negative terrain after registering small gains yesterday. The share market fell despite gains in most of the Asian markets as top stock Telecom slipped from its highest level in nearly six weeks reached yesterday. The NZX50 fell 0.50% or 13.969 points to 2784.273. The NZX 15 declined 0.47% or 24.052 points to close at 5103.733.

In South Korea, stocks closed 0.55% higher, as investors went bargain hunting following recent losses. The benchmark Korea Composite Stock Price Index (KOSPI) climbed 7.58 points to 1,383.34.

In Singapore, the stock index snapped four days of loosing streak on the back of broad based bottom fishing across the sector, thanks to a recovery on Wall Street after reassuring U.S. jobs and manufacturing data boosted hopes for a global economic recovery. The blue chip Straits Times Index spurted 35.98 points, or 1.61%, to 2,273.18.

In Taiwan, stock market closed the week in positives, ending the day at one-week high, as upbeat U.S. economic data lifted tech and financial shares, but Powerchip slid as it tried to reach agreement with bondholders. The main Taiex share index snapped its downward rally in sixth session as the Taiex index jumped 86.62 points or 1.41%, closing the day at 6231.15, strongest closing since last Friday when market closed at 6448.23.

In Philippines, the stock market sustained its downward trend, closing more than 1% lower as investors engaged in profit booking activities. Moreover, weighty losses in the key heavy weight stocks also dragged the composite index lower. The benchmark index PSEi fell 1.47% or 35.96 points to 2,398.30, while the All Shares index declined 1.85% or 29.17 points to 1,545.10.

In India, the key benchmark indices spurted in late trade led by rally in realty, metal and capital goods stocks. Higher European stocks and gains in US index futures boosted the market in was a highly volatile trading session. The BSE 30-share Sensex was up 256.36 points or 1.80% to 14,521.89. The S&P CNX Nifty was up 62.20 points or 1.46% to 4,313.60.

Elsewhere, Malaysia's Kula Lumpur Composite index went down 1.54% or 16.49 points to 1054.41 while Indonesia’s Jakarta composite index ended the day lower at 1950.99.

In other regional market, European shares climbed on Friday, with miners and banks gaining as investors continued to hope that the global economy has moved past the worst of its downturn. On a regional level, the U.K.'s FTSE 100 index rose 1.5% to 4,346.91, the French CAC-40 index moved up 1% to 3,226.69 and the German DAX index gained 0.1% to 4,841.20.

India Monsoon Strategy - June 20 2009

India Monsoon Strategy - June 20 2009