Mahindra Holidays & Resorts India (MHRIL) added 3,495 members in Q1FY11 against ~5,400 in Q1FY10 and ~7,000 in Q4FY10. Management has attributed the
following reasons for such a sharp dip in membership additions: (1) increase in down payment to 15% from 10%; (2) reduction in the maximum financing period
to 48 months from 60 months; (3) streamlining of aggressive sales force; and (4) payment of commission to agents over 12 months against 6 months. The
company also stopped letting out rooms to non-members to increase members’ satisfaction level which has led to dip in the direct sales from this segment. We
are reducing our membership addition growth to 18% from earlier estimates of 22%.
At CMP of INR 544, the stock is trading at P/E of 36.2x and 28.4x FY11E and FY12E earnings, respectively.
