Mumbai: It was supposed to be an innocuous briefing on a new business proposal, recalls Arun Nanda, chairman of Mahindra Holidays and Resorts India Ltd, of a meeting in the mid-1990s that he had with Anand Mahindra, vice-chairman of Mahindra and Mahindra Ltd.
The agenda was to evaluate the concept of timeshare—a form of ownership or right to use a property, typically a holiday resort—as a potential new business opportunity to diversify the group’s interests from manufacturing tractors and utility vehicles.
Old hand: Arun Nanda plans to give up all executive positions in the group from 1 April while remaining chairman of Mahindra Holidays.
Nanda took along to the meeting a bunch of clippings to make his case for a business that, in those days, made news for all the wrong reasons, such as dubious promoters and fly-by-night operators. What swayed Mahindra into green-lighting the proposal was that no newspaper questioned the concept of timeshare as a business, per se.
Incorporated on 20 September 1996, Mahindra Holidays received an infusion of Rs18 crore from the group to start its business. The venture turned out to be a rare multi-bagger; Mahindra Holidays, which raised Rs180 crore in a June initial public offering (IPO) that saw demand for 10 times the stock on offer, now commands a market value of around Rs3,000 crore.
The company’s flagship Club Mahindra Holidays brand has a customer base of at least 100,000 members and around two dozen resorts in India and abroad, offering holiday activities ranging from indoor games to adventure sports, water sports, camping and treks.
For the group, timeshare was the second attempt at entering the hospitality sector. A 50:50 joint venture with Accor SA, Europe’s largest hotel company today, had proved to be short-lived.
In hindsight, the decision to end the venture with Accor and cut losses was a prudent move, says Nanda, a Mahindra veteran of 36 years, who joined as an accountant in the management trainee cadre and plans to give up all executive positions in the group effective 1 April while remaining chairman of Mahindra Holidays and Resorts.
“The hotel business is a very capital-intensive business and it’s not easy to become the No. 1 player in the segment, as the capital requirement is very high,” Nanda said in an interview from his fifth floor office in the red brick headquarters of the Mahindra group, a signature building in Mumbai’s Worli area.
In the conventional hotel business, the promoter would need to invest for six-seven years before reaping any returns. “It takes years to make a profit, two-three years to build the business; whereas in this business, you sell timeshares today and give the right to use 12 months later. Hence, financially, the timeshare business model requires low capital,” Nanda says.
Analysts agree that the business model works, obviating the need for timeshare companies to borrow.