IPO issue well worth the price, says Mahindra Holidays

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IPO issue well worth the price, says Mahindra Holidays

Arun Nanda, Chairman, Mahindra Holidays Resorts, said even as there were reservations from quarters about the issue’s price, it had be seen in the light of its business model. "The business model is unique. People are unable to totally grasp what it is."

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Excerpts from Bazaar on CNBC-TV18 Watch the full show »

Q: It would appear attractive if you managed to grow your earnings maybe 40% plus in the next three-four years. Are you saying that that is achievable, that is the clip at which earnings will grow in which case even if its priced at 23-24 times today, in a couple of years time, it will look quite inexpensive, but do you have that visibility?

A: Because I am under the Sebi guidelines, I cannot give you a futuristic statement but even if you take the bad year of last year, we had a 43% CAGR growth on topline and a 78% CAGR growth on the bottom-line, if you knock off the last year and if you look at three previous years, our CAGR grew at more than 100% and we get 35% sales from existing customers referring new customers. So honestly speaking, I am quite bullish about the business and in fact I tell my friends that this is a wealth stock, this is one stock which will create tremendous wealth for its customers.

Q: There are some concerns also because of the big cavity that got created on your margins last year, higher customer acquisition costs, you had a lot of promotional offers that you put out, is that behind you with last year and can you actually see margins as well recover to what you were working at earlier?

A: What happened last year was totally unprecedented, we were growing, our topline was growing in excess of 40% and in the process to grow, we decided to go to Tier II and Tier II cities and we went and increased both our employee and fixed cost of offices and franchises. Also, our major customers during the last two-three years were coming from the financial services and IT industry, which went through probably the biggest trauma that year. So October-December was a very bad quarter, we bounced back in January-March. In fact, we did reasonably well in the first two months of the year, if you look at the offering documents, you will see that we had a significant growth. We have done one major correction, we have - in the Tier II and Tier II cities - instead of going by our costs, we have got into a franchise model. You will see the results when we give you the first quarter results of June, sometime in July.

Q: Your issue is done at Rs 325 or Rs 300?

A: I will be quite happy to come and break the news on your channel, but we are getting orders at the upper end of the band.

Q: So most likely you are going to say you stopped at most, it will be at Rs 325?

A: As I said, I am under a legal restrain, so I will be very happy to break the news at your channel sometime after 5 o'clock today.