Strong expansion plans augurs well for Mahindra Holidays & Resorts

MUMBAI: In last three months, the stock of Mahindra Holidays has shed 10 per cent as against a gain of 9 per cent in the benchmark index Sensex in the same period. Investors should, however, should accumulate the company's stock at the present market price considering its strong expansion in the coming quarters and robust business model. A recent report by brokerage by Prabhudas Lilladhar has recommended 'buy' on the company's stock and has maintained a target of Rs 366 from its current market price of Rs 284, an appreciation of 28 per cent.

One of the chief reasons for this optimism in the company's stock is its ability to expand periodically without resorting to high leverage. In the vacation ownership concept, the company has the highest member base of 1,47,000 across 35 different locations.

In the last three fiscals, through a combination of owned and leased rooms, the company, the company has doubled its room capacity to 2049. At present, the company has a land bank of 225 acres spread across different locations. For the present fiscal, the company has a target of 700 rooms. This increase in room inventory would address the issue of non-availability of rooms for its existing members and provide new locations for its members.

Interestingly, the company has secured this growth at a very low leverage. These additional rooms, which amount to Rs60-65 lakh, have been funded from the internal accruals and there is virtually no debt on the company's balance sheet.