Mahindra Holidays

Stock Opportunities
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Mahindra Holidays is an interesting company. One, its accounting baffles a lot of investors and second, its a sleeper for many years.

So, a company which going by standard accounting, has hardly any net worth and hardly generates 150 Cr PAT. This is due to the fact that it can recognize only 4% of sales on yearly basis based on the nature of product it sells.

Analyzing the company based on Balance sheet and P&L will give completely wrong impression about the company.

So, then how to analyze the company? First lets look at tangible data and then go to intangibles.

Tangibles (as of Q3 FY25):

  1. 1500 Cr Cash
  2. 1200 Cr Receivable
  3. ~6000 Rooms valued at 4000 Cr (My estimate - A single resort room today will cost north of 1 Cr)
  4. Zero debt

Next, on a going concern basis, the company generates 600 Cr cash flows on yearly basis.

Intangibles:

  1. Float - Doing business on other peoples money, take cash from customers, build resorts.
  2. 3 Lakh members pulling more members to join, assuming they are happy and satisfied.
  3. Rise is affluence and tourism to act as tailwind for growth.
  4. Brand Mahindra that inspires trust.
  5. Low Volatility - Unlike hotel industry, where room rents and revenues move to extremes, based on demand and supply situation, MHRIL is very steady, due to the nature of business

What is negative about the company:

  1. Slow growth - Adding members and building resorts takes time, its slow growth industry.
  2. Non Sense product - Who in his sensible mind will like to pay now for staying in resort for next 25 years (but we still have 3 lakh members and growing steadily)
  3. High Sales and Marketing costs - Related to point 2, if product in senseless (like ULIP in insurance), you have burn money to sell it.
  4. HCRO Subsidiary - I don’t understand why they acquired it and what value it brings to the table.

Now, If we just look at at first 3 tangibles, (1500 Cr+ 1200 Cr+ 4000 Cr = 6700 Cr), and the fact that it sells at 6700 Market Cap, it looks like Ben Graham net net on liquidation basis, with no value to 600 Cr operating cash flow, possible growth and even to strong intangibles.

But is it really a bargain? Will value show up in share price some day? As an investor, you have to decide. But here are few interesting pointers:

The company always traded at this kind of valuation since last 10 years (2015 to 2025), years have passed but rerating never happened. Many renowned investors have come and gone. Which will make any bull believe that something is wrong in the thesis.

I think management could have done something positive (e.g. buybacks etc) to instill confidence in long term investors, which it has not.

All the things that I have mentioned in this post, may already be discussed before, but still I though my post may add value. Apologies, if it has not.

Couple of twitter thread on MHRIL for reference:

Disclosure - No investment in MHRIL

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