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Ladies and gentlemen, good day, and welcome to Mahindra Holidays & Resorts India Limited Q3 FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kavinder Singh, Managing Director and CEO of Mahindra Holidays & Resorts India Limited. Thank you, and over to you, Mr. Kavinder Singh.
Good afternoon, everyone, and a very warm welcome to our Quarter 3 FY '21 Earnings Call. Today, I am joined by Mrs. Akhila Balachandar, our Chief Financial Officer; Mr. Dhanraj Mulki, who's General Counsel and Company Secretary. We have already uploaded our quarter 3 results on the exchanges and also the detailed presentation on our website. I hope you had a chance to go through the same. What I intend doing over the next few minutes is to take you through the salient points that I would like to highlight with reference to the earnings in quarter 3. If I look at the environment, we all know the situation with reference to the GDP, but I will not focus on that. I would like to touch upon the services sector. As you know that services sector in Q3 has lagged behind manufacturing and agriculture. And you would know that domestic air passenger traffic growth and railway growth is still in the negative. Even people visiting for recreational and retail activities for consumption of services like restaurants, cafés, theme parks, museums, shopping centers, the activity is in the negative. However, a couple of subsectors and services have shown signs of turnaround, which includes railway freight and sea freight as well as nonlife insurance premiums. As I look around, we are seeing some emerging travel trends, both at our resorts as well as around us. We believe the leisure travel at domestic destinations will recover faster. In fact, the signs of recovery are already visible. Travelers are increasingly opting for getaways to drivable locations. International inbound and outbound travel will take time to recover. Outdoor experiences like trekking, hiking, bicycling, there are many outdoor experiences that we are seeing are gaining momentum even at our resorts. Events in congested and crowded spaces for some time will be a thing of the past. People are traveling to the best of their ability, safely with extended family and friends. We believe the preference for trusted hospitality brands like us will only grow in view of the safety and hygiene concerns. Before I come to the specifics of the quarter performance, I would like to draw your attention to the -- some of the key points related to our unique and resilient business model. We have a cumulative member base of 263,000 plus, generating multiple annuity revenue streams whether it is vacation ownership income, whether it is the annual subscription fee and, of course, the resort income. Our revenue streams are highly predictable, and it is now evident in the last 3 quarters. Our VO income generally grows. And obviously, VO income comes from the deferred revenue. But so far, in the last few years, we have always been adding to the deferred revenue pool more than what we are taking out. Track record of consistently high occupancy, 80% plus, ensures also resort revenue growth as we keep adding resorts, our resort revenues also grow. Growing annual subscription fees from the growing cumulative member base is another income that keeps growing. Our balance sheet is strong and healthy, with robust operating cash flows, which support growth in room inventory without taking any recourse to debt. Deferred revenue of over INR 5,300 crores currently, regular cash flows and free cash of INR 848 crores, and if I add the INR 1,585 crores of receivables. If I were to securitize them, if needed, it provides us liquidity in excess of INR 2,000 crores. We are a 0 debt company at the standalone level. Let me move on to the financial performance. We have seen improvement in all financial metrics, owing to higher resort occupancies and extremely effective cost control. Our resort occupancies have increased and now stand at a healthy 75% in quarter 3. Of course, this is as a percentage of operational room inventory as compared to 30% in Q2 FY '21. In December '20, our occupancies went up to as high as 85%. This has led to a strong recovery in resort revenue and also an overall improvement in the financial metrics. Let me move on to the total income. Total income for quarter 3 is at INR 245.87 crores. This has increased by about 16% if I were to look at on a sequential basis. Of course, it is still lower than the quarter 3 of last year. Last year, quarter 3 revenue was about INR 267 crores. If I look at profit before tax for quarter 3 is at INR 54.95 crores as compared to INR 38.66 crores in quarter 3 FY '20, which is up by 42% year-on-year. Our profit before tax margin has improved by 788 bps to 22.3%, over 14.5% in quarter 3 FY '20. Profit after tax for Q3 FY '21 is at INR 40.62 crores as compared to INR 25 crores in quarter 3 FY '20, up by 63% Y-o-Y. Our PAT margin has improved by 718 bps to 16.5%. The interesting part is that even if I look at YTD level, our profit before tax growth and profit after tax growth is at similar levels. So this is not just quarter 3 performance. This is, in some manner, reflected in our YTD performance as well. If I look at the cost control measures that we have taken, which have resulted in total cost reduction by 17% as compared to same period last year. Our sales and marketing expenses are lower by 13% as compared to Q3 FY '20. Our share of referrals and digital is at an all-time high of 56% of total member additions this quarter as compared to 40% in quarter 3 FY '20. Of course, we have been beneficiaries of some waivers on the lease rental and both for our resorts and few branch offices. If I look at other expenses, we have reduced other expenses by 19% as compared to the same period last year. Major savings are on account of resort consumption, energy and travel expenses. And of course, there are waivers that we have received on minimum electricity demand charges from state electricity boards. If I look at our cash position as at 31st December, 2020, our cash position remains healthy at about INR 848 crores, owing to the fact that we have reopened our resorts, which have led to member upgrades, and of course, our ASF collections have also grown, our focus on quality member additions with higher down payment has also contributed to this. There are regular cash flows from EMI, which are coming in, of course, along with continuous tight control on costs in all areas of operations have helped us increase our cash position even during the pandemic times. Cash position as at March 21 was INR 781 crores. So if I look at over the 9 months, we have moved our cash position up by about INR 67 crores Let me move on to member additions. We have added 3,291 members in quarter 3 as against 2,681 members in Q2 FY '21. However, if I compare against the same period last year, we are still below the Q3 FY '20 member additions, which were at about 3,800. Our flagship higher tenure product offerings, which is Club Mahindra 25-year and Bliss have gathered momentum in quarter 3. Our focus is on lead generation through digital alliances, higher referrals. These are the engines of growth that we are pumping. If you look at our member engagement, we have moved from a physical heart-to-heart to digital member engagement. And this, of course, helped us in our referral and digital contribution at an all-time high of 56%, which I mentioned earlier. I would say that our focus on acquiring members with higher down payment continues. There is no change in that strategy. We also have been able to take on some new initiatives, which actually played out in this 9 months and some of them in quarter 3. Travel with Confidence campaign was launched in quarter 2, and it gained momentum. And I will talk about the benefits under Travel with Confidence in a few minutes. We also launched a new prospect website. We have been focusing on increasing organic traffic, which is the best way to acquire members at lower cost of acquisition. And we launched multiple demand generation campaigns, which include Family Premier League and also we have been running very, very interesting campaigns on Facebook, Twitter as well as Instagram, which is helping our prospects to look at our product and sign up. The initiatives that we have undertaken for improving resort occupancy include digitization of touch points. It is important that all the transactions are contactless, and that's something that we achieved in the first quarter itself. We have also digitized our resort venues to create awareness amongst members and prospects about MHRIL's, Mahindra Holidays rich food and beverage offerings. Our safety and hygiene standards have been constantly improved through the Club Mahindra SafeStay program. And with Travel with Confidence, we have offered our members discounted COVID tests as well as travel insurance and COVID insurance, special discounts for renting a car for members only, and sanitizing our -- sanitizing the car, personal car through Mahindra First Choice Wheels alliance. And of course, we have tied up with various airlines where members can avail exclusive benefits like flexible cancellation. Date change on most major airlines within India, free seat selection and other privileges. I think coupled with the contactless transaction and also the fact that our results are Bureau Veritas certified for COVID safe protocols, it has helped us to instill confidence in our members to travel to resorts again. And that has helped us in gaining the occupancy that I talked about. Let me spend a few seconds on the resort experience. We have realigned spaces and services and restaurants. New resort experiences and thematic evenings have been introduced, which ensure physical distancing, and yet members can enjoy the experience. We have also reengineered menus with in-room dining services. Our sanitation protocols are the best. We have been able to get guidance from the #1 facility management services provider for hospitals. And if I look at the challenges that we faced during the quarter, even in this quarter, there were dynamically changing travel guidelines. There were state-specific night curfews. There were restrictions on public gathering for New Year's eve. And as we speak, we are still awaiting guidelines from the government on spa and swimming pool operations in some of the states. So the best part for us has been that we have been -- we are operating at an inventory -- our operating inventory is at this point of time of our total inventory in India is of the order of 90%. And the best part is that during this period, we went on to acquire 6.67% stake in Great Rocksport. This is a profitable start-up. It's been in the business for more than 10 years. And they engage in soft adventure sports. And we believe that this acquisition will help us to leverage each other in growing the businesses forward. It's also in line with the trends that we are noticing, where people engage in outdoor activities. Let me move on to the inventory addition and also the capital expenditure that we have been -- we have not curtailed our capital expenditure at all. We added Jaipur, 72 rooms, a new resort. And in a place called Arookutty, which is in Alleppey, 82 rooms in Kerala, this quarter taking our total room count to 3,776 as on December '20. Construction activities at our project in Goa, Assonora, had resumed after the lockdown in early May, and this resort is likely to be operational in the current quarter, Q4 FY '21. And the project in Ashtamudi, which is an existing resort, continues. This will add 33 room units in this calendar year. We are also awaiting approvals for starting a 150 rooms project at Ganpatipule, overlooking Arabian Sea on a beautiful piece of land. And also, the expansion project at Shimla with additional 160 units is likely to be started in some time. We are also looking at expansion of our existing Puducherry resort and a new resort in Theog, a boutique resort in Theog to subject to the approvals. We have at this point of time, if I look at capital expenditure, on a year-to-date basis, we have spent about INR 75 crores. In quarter 3, our capital expenditure was approximately INR 36 crores. On that note, I will switch to Holiday Club Resorts performance. Holiday Club Resorts, Finland had turned around in quarter 2 and delivered positive PBT for the quarter as a result of very good occupancies in this period in the quarter 2. The best part was that the timeshare sales had also improved in the quarter 2, and there was significant cost-effective measures taken in quarter 2. And this led to a positive PBT for quarter 2. However, towards the end of October, we have seen the effect of second COVID wave in November and December. And as a result of which our occupancy has dropped in the spa hotels, but I want to confirm that our timeshare and renting business has held steady even in these difficult times. A lot of you would know that Finnish government has extended the restrictions on entry into Finland. I think this was there in our investor deck as well. The border control continues as a result of which the Lapland area of Finland, where tourism relies on international tourists flying in to meet Santa Claus, see the northern lights or take a snowmobile safari has seen visible numbers plummet. I think the business conferences and events have also got impacted in this quarter, leading to a drop in operating performance in quarter 3. If I look at the numbers, the turnover of EUR 30.56 million was achieved. This is under Finnish accounting standard as against EUR 41 million in quarter 3 of FY '20. Despite the subdued performance due to the pandemic, the operational loss has been curtailed to EUR 1.57 million for quarter 3. And if I look at the loss before tax of quarter 3, it stands at 3.17%. And this is against EUR 0.43 million in quarter 3 FY '20. So even if I look at the year-to-date performance, year-to-date performance of Holiday Club because of the good performance in Q2 stands firm. If I were to look at the consolidated numbers, the consolidated operational EBITDA stands at INR 100.7 crores for quarter 3 as against INR 99.51 crores. And in fact, margin has improved by 296 bps to about 20%. The most important thing I want to make clear here is that our business model, vacation ownership business model, both in India and even in Finland, as you can see, the timeshare sales have held steady, is more resilient than traditional hospitality sector. I would also like to make a point here that if you look at the consolidated numbers, particularly at the bottom line, the real issue is the ForEx loss that you would notice. This is due to the depreciation of Indian rupee against euro. This has no impact on our business in terms of cash or any other way. This is an accounting entry. And this is something that we are looking at because as you noticed that this may give you a little bit of a distorted picture. So therefore, I chose to highlight the operational EBITDA that we are at INR 100.7 crores for quarter 3 as against INR 99.51 crores. So operationally, Finland also saved EUR 7.74 million costs in the quarter 3. So the Finnish team, led by Ms. Maisa Romanainen, our new CEO, who joined in July last year, is doing a very good job in controlling costs and keeping an eye. I would also like to highlight that while there may be concerns about the COVID, the level of infections in Finland continue to remain very, very low at about just 300-odd people. They are performing approximately 25,000-odd tests a day. This is a very, very high level of testing, just 300 and the number of people in hospitals are actually less than 50. So the situation is in control. But the Finnish government has been extra cautious, and that is why they have made a lot of announcement. As a result, we saw the occupancies plummet. But having said that, our timeshare and renting business has held firm. And as we look ahead, the vaccine rollout, particularly in EU, if it happens as planned, we believe that we are looking at a quick recovery even in the Finnish operations and, of course, Sweden and Spain. On that note, I would like to say thank you so much for patient listening, and we are open to questions.
[Operator Instructions] The first question is from the line of Nihal Jham from Edelweiss.
Sir, 3 questions from my side if time permits. First is the Jaipur property is a fresh lease we've taken, right? It was not in construction, if I understand right?
Yes. So Jaipur property, Nihal, is a property, which is -- which was in existent. It has been refurbished by the current owner. It is a lease property, which we are operating. It's in full control. We are going to manage the property and we have started the operations in December. That's right.
Sure. That is helpful. Sir, second question is, if you could mention the AUR for the quarter and continuing from the discussion in Q1 and Q2, how is the membership mix moving when you look at CMH and Bliss separately or even GoZest? Just more qualitative thoughts on that.
Okay. So I think thanks for asking this question. It gives me an opportunity to share the product mix. So I have made previous quarters these statements that in April, we launched GoZest, which is a 3-year product, obviously, with a lower transaction value. And we have always been maintaining that in our business we need to get members to experience, and then we would convert people who have joined in GoZest into the long-term product, which is a 25-year product. And this actually brings down our cost of acquisition anyway. So while the AUR got temporarily impacted in the quarter 1 and quarter 2, we have seen a very smart recovery in quarter 3. The 25-year product has begun to sell the way we used to sell. Of course, it is still coming -- if I look at as a percentage of my total sales, then yes, it is still some times away, but particularly in December, we saw a very big movement towards 25-year product as well as Bliss, which is a 10-year point based product. And these are the 2 products which are being focused upon while GoZest continues to sell. But on total -- and the best part is while the product mix is getting in favor of longer tenure, 10-year and 25-year product, but most importantly, our focus on down payment is ensuring that we are getting most of the members with very high down payments, which is going to help us, not only in the cash, but also in terms of their spends when they go to resorts. As far as the actual numbers of AUR are concerned, Akhila, would you like to comment at this point of time, our CFO?
Yes. Thanks, Kavinder. So yes, AUR, as Kavinder rightly said, we have seen a good improvement in the mix, and which is what we've been targeting post Q1. Q2, we did a lot of work on it. And Q3, the momentum has really picked up. So in Q3, our AUR right now would be around 2.6, 2.7. And the idea is to keep -- bringing it back to our earlier levels.
Sure. That's very helpful. Last question from my side. On the cost initiatives, you did bifurcate specifically how each of the items have helped in reducing our cost base. But I would assume that once our resort operations do end up coming back to normal, most of these costs should come back to normal. So if there is any plan of some sustaining -- a sustainable number that you can share? And specifically on marketing, that if there is such a high contribution from referrals, maybe because of the COVID scenario, is there a potential that structurally marketing cost could come down and what are we budgeting in the years ahead? If you could just give color on that, and that will be from my side.
Okay. So Nihal, I would just like to give you a broader perspective. If you look at over the years, in 2014, '15, we used to have a profit before tax margin of about 15-odd percent. We brought it to about 21-odd percent in 2017, '18. And then we had a new accounting standard, and our PBT margin, again, went down. And we have been since then improving profit before tax margin year-on-year. I agree, this time, the gains are a little higher than what they are normally. What of this is sustainable? Let's spend a few minutes trying to share with you how we see it internally. If you look at resorts, yes, there are costs which are linked to an output. So if you look at F&B, as resorts get utilized more, F&B revenues will come and so will the F&B cost be. But we know that F&B margins are very good for us. So we love that cost because that cost will give us a very strong kicker in the top line. So we are not worried about that part. Now if I look at as we open our resorts, you would be happy to know that in quarter 3, we ended up of making 63 resorts operational from as low as probably 25, 30 resorts in August or September. So since we have moved up on the resorts and yet held on to our margins, which you have seen. Obviously, we are in a very calibrated manner, controlling the -- one of the big costs is the energy cost in the -- in any resort or hotel environment. So we have been very carefully controlling that. Also our solar plan continues. In fact, it will be accelerated. It's already under acceleration. So our aim is to control the energy cost. Our aim is to control all the costs in the operation of resorts in a manner that we get sustainable savings. So that is something that we are committed to. So we do see some savings continuing even after all resorts get into full kind of -- in fact, in December, most of them were operating at peak capacity. So we are comfortable there on the resort cost management. When I come to cost of acquisition, you have a very good point that if we are going to depend on referrals. Our -- structurally, there could be cost reductions in cost of acquisition. And that is something that I am committed to, to bring down the cost of acquisition using referral as a route. I must, however, hasten to add that digital leads do not come cheaper. They, as you know, that the duopoly of Facebook and Google ensures that the costs are not low, but we still believe that digital lead generation helps us achieve twin objectives: one, digital marketing, and digital adoption has accelerated during the pandemic. So we believe that while the digital cost of acquisition may not be very low, but they are not going to be out of whack. So how do we play the mix of customer acquisition so that our cost of acquisition remain on a sustained basis. However, if you look at the lifetime value of our customers, our cost of acquisitions already are low. But we believe that structurally, if we chase the [ referral ] business, the digital alliances business, and there are various other innovations that we are doing which will play out, we should be in a position to bring down our cost of acquisition, while growing our member base. So the answer to you is yes, we do see our margin improvements continuing. Of course, during this period, you will understand that because the operations were in a bit of a flux, the income was accruing and costs were very, very tightly controlled. We will have to see how do we sort of manage and maintain these margins. But definitely, I am more optimistic on growth in resort revenues, member additions. And yes, if there is some amount of money that we have to spend in sales and marketing, that we will do because we have to also ensure that our brand is salient and we are a consumer company. So we will constantly keep an eye on the mix of the costs as well as the top line.
The next question is from the line Baidik Sarkar from Unifi Capital.
Congrats on a strong growth in India. A couple of questions. In spite of the net member count being positive between March and December, there seems to have been a runoff on the quantum of deferred revenues. So if you could just help us understand that. And as a corollary to that question, how should we read the 29% degrowth in your interest income because one would assume, given the resiliency in ASF, your EMIs are being honored. Please help us understand these 2 pointers.
Yes. So Akhila, would you like to answer Baidik, the questions?
Baidik, you'll need to repeat your question. Can you do that?
There was a bit of a trail off. We couldn't hear part of it. I was also not able to hear.
Sure, sure. I'll definitely repeat that. So my question was, in spite of the net member count being positive between March and December, there seems to have been a runoff on the quantum of your deferred revenues, right? And as a corollary to that, there also been 29% degrowth in your interest income because one would assume that the ASF saliency indicates your EMIs are being honored. So how should we view the degrowth in 2 of these buckets?
Sure, sure. So when you see a runoff on the deferred revenue, what exactly do you mean?
There's -- your deferred revenues have come off, right, from your March numbers?
That's correct. Okay. So now I understand your question. So Baidik, while we have had net member additions for the YTD number, if you realize quarter 1 and quarter 2, the quantum of GoZest was much larger and we've been sharing by saying that AUR is a bit lower, right? On an average, if you take till last year, our AUR would be in the range of 3.4, 3.5 at a complete mix, which is 25, Bliss any other short products that we keep doing. But right now, even in Q3, despite our endeavors to go higher on CMH 25, which is also paying off. Our AUR is still at around AUR 2.6, 2.7. So we still have some catch-up to do to reach to 3.4, 3.5. What happened, therefore, is in the overall year, if -- last 2 to 3 years that we have seen, we have added more into the deferred pool than we have withdrawn. In this year, we have actually spent more than we have added. But if you take -- since AURs are now coming back, we've actually added more into the deferred revenue. So if you see the deferred revenue between September and December, we're actually higher than if you compare March to December. So this is a year that, really speaking, one cannot do too much comparison last year to this year. At an operational level, we have also been fairly focused on quarter-on-quarter, month-on-month to see how we are able to respond to the highly dynamic situation. So yes, answer is right. You are correct in saying that there has been a dip in our deferred revenue. But the part is that from September onwards, we have seen the increase. And I ensure that this momentum will continue even in Q4. So I would take this as a one-off year. And therefore, that's my answer to it. The second question was on the interest income. So again, what we have done, particularly over the past couple of years is that we have tried to focus on lower -- higher down payment and lower EMI members. So this is something which has done us pretty well. It has also helped us improve the quality of our members. And therefore, the lifetime value which is what Kavinder has been propagating. In this step, particularly, if you see the first 2 quarters, when member additions were on the softer side, also they were of the lower-tenured members. But anyway, it is not a norm. Interest income, which is generally highest in the initial few months has definitely been impacted. But to that extent, the counter is that my cash position has been stable and, in fact, in quarter 3, end of December, we were at good numbers. So therefore, unable to redeploy in treasury and the treasury income has kept on improving and stabilize. So this is the way I would explain the income thought. I hope it's clarified.
Sure. That's very helpful. So coming back to Kavinder, this is a sales-based question for you. We're a month into quarter 4. And I think one would assume that the environment is a lot better and safer than it was in the last 2 quarters. What's the momentum that you're seeing on the sales side? How would you qualify the sentiment that your funnel is showing up? And what kind of a number would you guide us to assume in terms of your net membership additions for the quarters ahead?
So Baidik, we don't normally give any guidance or numbers, but I can tell you one thing that both on the resorts as well as on member enrollments, yes, you are right, we are better off than what we were in the last quarter as the current month is progressing, whether it's resort occupancies and whether it is the member enrollments. While I must hasten to add that the -- while the sentiment is improving, the discretionary income is something and the discretionary spends more than -- spends, the sentiment is also chasing multiple things in the consumers' basket. So we definitely are using digital as a route and referral as a route to reach out. And I must say that we are getting some success. And obviously, we will have to keep our fingers crossed because there is this vaccine rollout, which is also causing some level of excitement. And I only hope that some of these things play out in the external environment as well. But answer is, yes, January has opened up on a positive note.
And my last question, is there a prospect of an OpEx clawback in Europe given the second wave? I asked this in the context of the fact that in the first wave, there was support of the government, financial and otherwise, and there was OpEx support from your vendor ecosystem in Europe as well. Are we looking at such prospects now as well? Or should we continue to expect a fair degree of burn in Q4 as well?
So if you're talking of government support, whether it is Finland, whether it is Sweden, whether it is Spain, it has come in. And they have been very, very supportive of the businesses. And there is some level of support. I mean, nothing big numbers to talk about, but there is some support, which has come in the form of the disbursals, grants, loans, et cetera. Now if I look at our condition in our Holiday Clubs condition, so even now in January, the Finnish government remains very, very focused on creating the dissemination that people should avoid travel because they are -- they have seen -- they are a little bit concerned about this second wave, not yet. But if you really look at numbers, they are erring on the side of caution. Because if you really look at numbers, there are only 300-odd infections being reported every day despite the testing being at a fairly high level. So also, the vaccine rollout in EU has begun, and Finland will, of course, get that -- their share of the vaccine. So my view is that every month, things should improve. And as they hit their season, which begins sometime in the next quarter, there should be a big uptick in the Finnish businesses because as far as holidaying is concerned, as far as timeshare is concerned, that's a part of their culture. So I do think that the current dip is very, very temporary. And I think things will improve literally month-on-month. And as far as the -- you use the word burn. I mean, really speaking, the cost control is extremely good. Even more cost control actions will be taken. So I am not really concerned about the cash position at Finland. It is very, very good. And I'm not too worried about the burn. It's all about how do we -- when do we start making operational profits because of this COVID situation. That is what we will be focused upon. We are not really looking at burn. We are looking at making at least breaking even and making some positive number. So that is what our focus is. And by the way, you must know that Jan, Feb, March is ideally a season in Finland, but the season is partly marred because of the fact that the international visitors cannot come to the Lapland area. And that is where lots of movement happens in Finland, the winter holidays, winter tourism, including skiing, et cetera, that is definitely getting -- is going to affect the top line. But as the borders open, as some level of restrictions sort of are removed, we do believe that things will come back to normal. And you know that Finland actually did a fantastic job in April. If you look at July, August, September period, where they ended up doing extremely well in their holidaying season. So their holiday season actually starts around July. So -- and the winter part, which is the Jan, Feb, March. So these are the 2 quarters that we really look forward to. Of course, Jan, Feb, March partly impacted, looks like. But definitely, we are looking forward into the future with a lot of confidence because they will bring things in control. As it is things, in my view, are in control, it's just that there is extra caution that government is exercising right now.
The next question is from the line of Ankit Kanodia from Smart Sync Services.
And first of all, congratulation for decent set of number given the current situation of travel-related companies. So my first question is regarding this -- it's a follow-up of the earlier question regarding the HCRO. So coming back to the operating profit, which we have just spoken about. What we see is that the revenue of HCRO is at par with our Indian operation, or in fact, it is a tad higher than that. So assuming that we managed to turn around things and maybe the COVID is past us and then in a normalized world, as in, maybe a year down the line or maybe 2 years down the line, what kind of actually margins are we looking at? I expect it would not be as high a margin as we see in our Indian operation, but any color on that?
Okay. I think it's a very good question. See, if I look at the times when we did not have COVID, and please do look at our numbers in the year '17, '18 where we delivered EUR 12 million EBITDA, which is a very good number. I think the turnover was about EUR 150 million, EUR 160 million. So my view is that if we are able to get this COVID part in some level of control, which I think they will because Scandinavian countries are extremely focused on getting back their economies on track, I am expecting very, very similar levels of performance going forward into the future in FY '22 because big changes have happened from '17, '18 to now. First of all, we have a new CEO. We have a new team. And they are extremely focused on managing the cost and driving the top line. And I also have a feeling that the -- it's not a feeling. It's borne by data. That timeshare as a method of holidaying in Finland is only going to grow because now people are wanting to be in their 2-bedroom, 3-bedroom apartments. They don't want to sort of be out in places where they could be together with others. So the method of holidaying is going to go in favor of timeshare. The pandemic may make a very big change in their behavior. And therefore, I'm looking at Finland with confidence, both in terms of delivering the EBITDA numbers that they are used to. And second, the cost savings that they have brought, some of them are going to be in permanent nature. For example, if you look at their spa hotels operations, that is where there is going to be a big kicker coming, which will change the game because the productivity and Finland, as you know, the cost of people are high. So there's a lot of focus going on, on improving the people productivity. And there are some metrics that we have introduced, which are sort of helping us plus there has been a very big strategy exercise that has been conducted in Finland. Some of those things will begin to play out into the FY '22. So I'm pretty confident that we will be, first of all, coming back to '17, '18 levels. That is our first target. And thereafter, we should see improvements going forward year-on-year.
Okay. And the last question would be regarding what we discussed in the last quarter con calls as well. And that is regarding the cash which we have in the book, I think it's around INR 800 crore today. So as in the market or the investment community generally don't like uncertainty in terms of what are our plans with that INR 800 crores. If you can give some clarity as to how we are going to put that into work. So like we discussed last time that we cannot distribute dividends because of the issues with our accounting policies getting changed, and we don't have a net worth as per the accounting policy. We discussed that we are going to have a discussion on that with ministry and see we can make some changes there. And secondly, in terms of some of our aggressive strategy to invest in new resorts. So any color on that? Or if you can provide some clarity or maybe add some -- a slide on our presentation where how we are going to use this INR 800 crore over next, say, 1 year or 2 years. That will actually give a lot of confidence to the investor community.
No, this is a great suggestion. And we will definitely look at it. And just to give you an answer, and it's an overall answer, maybe not in the detail that you are asking. In our business, as you know, it's -- our model is unique. Now it's even proven that we are resilient. And it's very important that we deploy our cash appropriately. So one of the things that we have discussed in our Board, and it has been discussed often is that how do we use this time to pick up properties, which might be available at the right price. I'm not still using the word distress because I think in India, people hold on to the properties. It's not something that people -- people do not drop prices and say that it's a distressed sale unless there's an issue of debt. So at a very, very broad level, we are over, let's say, focused on acquisition of properties. When I say properties, I mean resort properties. That's one thing that we are focused on. And there's work going on, and you should hear once we are able to conclude something. The second thing is we have also built a very strong team in our in-house to launch and run multiple greenfield projects. When I say greenfield projects ground zero. So I did mention in my opening comments that we have land available in Ganpatipule area, where we will come out with a new resort, that will be about INR 150 crores, INR 200 crores kind of an expenditure. And we also are planning to put another INR 150-odd crores in the Shimla area, Kandaghat, which is an existing resort, which is a brownfield expansion. We are looking at another 60-odd rooms in Puducherry because Puducherry is again a growing destination for us. That's another INR 50 crores, INR 60 crores. And then we, of course, have a land in Theog and there are some older issues with reference to permissions, which we are sorting out. Another INR 50 crores, INR 60 crores there. So when I keep adding up, I know that there is enough cash that can be deployed. And by the way, we'll keep adding to our cash position. So it is going to be a situation where we will spend a little faster than what we have spent in the past because we do see growth. We believe leisure is going to boom, particularly in the next 3 years stream even more thereafter because people are going to get used to the idea that India has a lot to offer. And our own brand because of the safety and hygiene-related measures that we have taken has also moved up a couple of notches in the minds of people in terms of the way handle the situation and how we are taking care. So yes, we have a plan of going greenfield, brownfield and acquisition. And I must hasten to add that if I -- I mean, I know your question is not on inventory. We obviously continue to look at leasing opportunities as well. So yes, there is a plan in place. We haven't put it out exactly, but I have gone on record in media that we are looking to add at least 1,500-odd units over the next 3 to 4 years with an expenditure of approximately INR 1,200 crores. Yes, I agree with you by 3 or 4 years, that INR 1,200 crores that we spent, we would still be left -- we will still have money on our books because we would have generated also in those 3, 4 years, more money. So yes, we have a plan and we are sort of looking at it. And the pandemic has definitely made us think harder, how do we deploy this cash. So this is as broad an answer as I can give at this moment in time.
Just one last quick question. Whatever the plans are if you can just put one slide from our next presentation -- in the next presentation that this is the plan. Like it will help the investor to actually understand much better.
All right. Thank you.
The next question is from the line of Dipan Mehta from Elixir Equities.
Congratulations on a really good set of numbers. I've been tracking this company for a long time. And at least, given the challenges, it's a fantastic performance. My question is the Mahindra Group has gone on record to state that they want to exit out of low ROI businesses and low profitable businesses and focus on their ROI at a group level. So in light of that strategy, which have been very well appreciated in the market, have they looked at HCRO and trying to divest it off because since you've taken over the company, I mean there have been so much of volatility and turmoil in its earnings that when you look at the consolidated figures of Mahindra Holiday, at one glance, we always feel that it is a big underperformer when it comes to earnings growth. So any thoughts on that? That's the first question, sir.
Okay. So I would like to hasten to add that we are committed to bringing the Holiday Club. I'm not commenting on the group's announcement because those are out there in public domain, and we remain committed to whatever group's requirements are from our company. And therefore, we are also driving higher return on equity, return on capital employed, that is something we remain focused on. So as a part of that and even otherwise, we have been having a discussion internally on how do we take Holiday Club to the next level. See, the good part of this acquisition is that the business model of making money through timeshare in a nation where holidaying is a culture is well established. And there is no player in the Scandinavian or even European world, which is as respectable as Holiday Club resorts. So they have some amazing properties and opportunities to build the timeshare business, both in Scandinavian part of Europe and eventually who knows in the Mediterranean Europe. So I think what we have to do is to, one, come out of these pandemic-related issues and get back to basics. And I did hint in the previous answer, that we are definitely looking to hit a certain milestone in terms of the EBITDA levels. And that milestone will come. We are very confident because we have a new team. We have taken action. We have a new CEO. We have a new team, and they are truly committed to get this Holiday Club business to the next level. And there is a market, there is a big attraction towards owning timeshare in Finland and some amount in Sweden and in Spain. And Spain is -- we are not there in the mainland. So we are in Canaries. So the big business obviously is in Finland. So if you really look at our objective would be, since we understand timeshare and how do we really sort of take the company to the next level. So as I mentioned, there has been a very big strategy exercise that has been undertaken. We know exactly what we need to do to take that business to the next level. And the team is committed to it. In fact, they are the ones who did the activity of building this strategy. So I personally feel that we have really 2 tasks going ahead: one, keep growing Mahindra Holidays, as the question was asked, new resorts, new properties, new member additions; and obviously, generate higher value than what we are doing. Of course, we are improving every year, every quarter. Parallelly, since -- and my best hope came in Q2, where despite pandemic, the team delivered a positive PBT, which was just not expected, both through the cost improvement as well as through the very high occupancies that they achieved in that period in the spa hotels as well as in the renting business. So there are fundamental structural changes we are doing in terms of the people productivity as well as the top line. Now all of these capabilities have been built. They need to now play out. So my view is that in the next 2 to 3 years, we will see a very massive turnaround in the Finland business, in fact, starting next year, FY '22. And then we would have definitely created a business, which is, one, of course, truly global, and that's not the only reason to be in Finland because we believe that Finland as a country and as a business is found on its own, okay? While we do expect over a period of time, Indians to travel to Finland, but our business premise is based on the fact that this business can stand and deliver significant value to Mahindra Holiday shareholders as we move forward. And the good part is since the team is extremely committed and they know the business, it's not taking away too much of our attention anyway. So this is the answer that I have, and we will deliver on the return on equity numbers also that have been talked even at consolidated level. I'm pretty confident of that.
Nice to hear that. Second is a quick question, sir. In the event of a default on EMI, what happens to the earlier EMIs and down payment already paid? Do we keep that with us? Or have to be refunded to the vacation owner?
So it's a very technical question, but let me give you a simple answer. If there is a default, the member cannot holiday. The first thing is you cannot holiday, if you have a default, number one. Number two, obviously, we have our teams to reach out and try to make the default corrected, get the default corrected. So that's a constant process goes on. Some people get into default, then they come back. They go into default, they come back. Because this is something -- and by the way, we have a lot of these standing instructions. So we have these post-rated stuff. So everything normally moves smoothly. But yes, there are defaults, like in any collection activity happen. And the quick thing that happens, which is coded in our system is that the member cannot holiday if there is default. Now coming back to who takes the money, it's very simple. As long as member is there on our books, a member, member obviously doesn't get the money. But if member initiates a cancellation process, then obviously, there are rules around the cancellation. So those rules kick in. So that is how it works. And unless the cancellation happens, the money is obviously with us, whatever money we have, and the member continues to be a member.
So on cancellation, what is our revenue?
So let me -- this is Akhila here. I would like to add...
No. Sir, I would like to just explain the reason for me asking is that when you look at securitization or the recoverability of such a huge outstanding amount, we just want the comfort that we wouldn't be hit by supposing there's like, of course, COVID, we kind of missed a bullet. But in the event that something goes really horribly wrong that we won't be hit by huge defaults over there. So how can the management provide comfort on that concern?
So I would like you to -- before Akhila can comment, I think she wanted to, but let me just answer why don't you have a look at our last 5 years track record? Our receivables number has been what it is. And we have gone through various ups and downs, whether it is demonetization, GST and now pandemic or what have you. I mean our track record of being able to collect our EMIs and annual fee is well demonstrated, including in the last 9 months. So I'm saying that we have also, by the way, a very appropriate policies related to provisions. If you have that in mind, we obviously make appropriate provisions when we find that the overdues are increasing beyond a certain point. So there are provisioning policies. As you know, KPMG is our auditors, BSR & Company. So we have a proper provisioning policy. We have a collection methodology, and we have a track record. I think that should broadly answer your question unless Akhila wants to further add to that.
Yes. It does. Yes. Yes, ma'am, if you want to add anything?
Yes, I want to add one more point. So while we call it debtors, let me really explain. We've sold membership for 25 years. And what we are doing is we're actually collecting money in advance. We are only offering a member an opportunity to pay over 3 to 4 years. There are people who take 3 years, 4 years, 12 months, 24 months. But in a certain year, a threshold is reached. They anyway cannot start holidaying. So in a way, there is really no outstanding or debtor in our case. We are collecting money upfront. In that upfront payment and so services is not at all delivered. It is not like the car loan or housing loan where the loan has been given and the house is also being purchased. So these are simultaneous 2 transactions happening. In our case, the services are delivered only post collection of the money. So while, yes, there is an exposure to the membership, but we -- really speaking, we have not rendered the service till the money has been collected. So again, I just thought it will be better to clarify and rest that concern of yours.
Due to time constraints, that was the last question. I would now like to hand the conference over to Mr. Kavinder Singh for closing comments.
So thank you very much for taking your time on a busy day and listening to us. And as I mention all the time, that we are very, very keen to know and answer your questions because it helps us to learn. It helps us to think. And in this journey that we are going through, you are an important part. And every question of yours, we make a note. And we think about it. And we try to get better every day. With that moto, we move on into -- obviously, the current quarter is on, and we are looking forward to FY '22 with confidence. Thank you so much for patient listening.
Thank you. On behalf of Mahindra Holidays & Resorts India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.