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Good morning, ladies and gentlemen. Welcome to the Q4 FY '20 Earnings Conference Call of Mahindra Holidays & Resorts India Limited.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, sir.
And a very warm welcome to our quarter 4 FY '20 and full year earnings call. Hope you and your family are healthy and staying safe during these uncertain and unprecedented times.Today, I am joined by Mrs. Akhila Balachandar, our Chief Financial Officer; Mr. Dhanraj Mulki, our company Secretary; and our Chairman, Mr. Arun Nanda. I had requested Mr. Nanda to come for this Investor Call and share his thoughts. And he has some Board meetings thereafter. So I am very, very happy, and it's my honor and pleasure to bring Mr. Nanda on the call. Over to you, sir.
Thank you, Kavinder. First of all, let me add my welcome to all my dear friends. And I join Kavinder in his prayers that you, your families and all your near and dear ones remains safe and healthy during this difficult times. As I have been saying, in my 70 years, I've not seen such difficult times, but we hope and pray this too shall pass. I don't want to take too much time on that, and we can talk about later.I just want to go back to 11 June '19, when I, after a long time, came and spoke to you at an investor conference at the Four Seasons Hotel. And the reason for doing that was a big change in our accounting policy, which had upset us all because we were allowed to account for only 4% of our profits of our turnover, where majority of the sales of the cost of sales had to be booked, and that had affected our profits significantly, but I had also projected that this is a good news for the investors because it brings predictability of future earnings. I'm very happy to tell you that we have projected a VO income of INR 344 crores and we are at INR 346.7 crores. We have projected an ASF income of INR 289.6 crores, and we are at INR 291 crores. We are at a deferred revenue cumulative carryforward of INR 5,476 crores -- we had projected INR 5,476 crores. We are at INR 5,371 crores. This number would have been very close to INR 5,476 crores, if our sales were totally not lost in the significant part of March. March is our peak month, and we did not get any of the sales. The income would only have come to the extent of 5 -- 4%. That is why that difference is not showing, and it is showing in deferred revenue. I think later on, Kavinder can tell you what the March '19 sales were and March '20 would have been similar. And if you add that difference, you would probably come to the same figure. The good news, as again, I had told you that while we carry forward revenue on book of INR 5,476 crores, the deferred cost, which we carry forward against that, is INR 713 crores. That means INR 4,763 crores is clean profit, earned majority of it realized in cash, and we are carrying it in the books purely because of Ind AS 115. This is earned and except for small portion, which realization of the receivables may not happen and our receivables are much less than that, so this INR 4,700 crores, I repeat, is an earned profit, which is not booked, and 75% to 80% of that is also realized in cash. So this is -- I'm very proud to say that my team, led by Akhila, predicted these figures and I passed my chartered accountant more than 50 years ago in 1969. I have never seen projections made a year ago, being so close to what they have been achieved. So it just shows not only the quality of the management, the quality of team, but it also shows a very high level of predictability because of this accounting standard.From a young friend, I have a question if some of you, a very bright 1 could answer me that question. If you see my balance sheet, I have INR 781 crores of cash sitting in my books. I have receivables of INR 1,682 crores, and I will digress a little. I have spent 47 years in Mahindra and dealt with various industries. If you have debtors of the nature of auto cars, for example, what Mahindra Finance does or of housing, which are the 2 big borrowing areas, the securitization costs are high because the lender has to -- the buy who -- the guy who buys your book had to physically control the assets. In our case, the assets are in our position. The key to the resorts and its right to use is in our control. That is why, although we've not had any need to securitize those receivables, but I can tell you that if you want to securitize the INR 1,682 crores, we will get rates at least 200 to 300 basis points lower than what our other people who would securitize their books pay for.And we have fixed assets of INR 2,082 crores, which leads to INR 4,545 crores, and with 0 debt in our books. And in the wisdom of our investors, not you, others also, our market cap is INR 1,662 crores. It is nearly 1/3 of realizable assets, forget brand, forget INR 5,000 crores of revenue, which we have not booked, which net of cost is INR 4,700 crores. If you add all that, it is INR 10,000 crores. Plus, I want to make 1 more point. The written-down value of our resorts is INR 700 crores. Today, it costs, Kavinder, more than INR 1 crore a room to build the resort. And we have 2,157 rooms in our books. So there's a depreciation and escalation into that. That's another INR 1,400 crores. If you add all of that, forget future earnings on what we have in our balance sheet, the value is close to INR 11,500 crores, INR 12,000 crores. And you are valuing my company at INR 1,662 crores. I'm an old man. I did not know, analytics at our time was not there, but I would like to be educated about that 1 day. And this does not include HCRO, which we own 100%, and I will come to HCRO.I'm not going to talk in details about operation. But I treat this pandemic as [Foreign Language], which you might have read in our Hindu mythology. There will be [Foreign Language] and there will be [Foreign Language]. And I am reasonably sure that Mahindra Holidays is going to benefit from that. Kavinder will expand. I just want to make 2 points: one, domestic tourism is going to increase; and the second is we have a very strong base of committed members. Kavinder, I believe you are going to talk about this in detail on what the future looks like and all that.
Yes.
Yes. Okay. One of -- most of you, and I'm using the word most of you, had very strong apprehensions when we took over HCRO. I want to give you some data to tell you when we bought this company and the previous year loss in September 2014 was EUR 9.68 million. In our first year of operation, the loss was EUR 7.21 million because we were there for the part of the year. In F '18, EUR 4.72 million, we have made a profit of EUR 1 million. F '19 results, as I told you last year, were affected because there was a contractor who went bankrupt and we had a problem and we had to write a significant amount of this. And this year, the March has been totally wiped off and March is the highest skiing season, and we lost our resort income and timeshare sales at the month of March. In spite of that, from a loss of nearly EUR 10 million, we are down to -- we would -- should have made a profit of EUR 4 million, EUR 5 million. But even in spite of all that whole month of March being written-off, we have still made a small profit, and we have not made a loss. I want to give you another good news. Because anybody who will value HCRO will take EBITDA multiple and deduct the debt. When we took over the company, the debt was EUR 51.7 million. And today, the debt is EUR 19.6 million. So that means we have paid over EUR 32 million of debt. If you give no credence to the EBITDA growth, which you have to give, then also the value of that investment has gone up by EUR 32 million, which is 50% of what we have invested. It will become 150%. If you take the EBITDA growth into account, you will come to a very different figure, but I don't want to tell you that. But I just want you to analyze and those of you who want to understand this are free to take time from Akhila and understand, and she will take you through those figures.Akhila, was I right in my figures?
Yes, sir. That is perfectly correct.
Okay. I want to give you -- I want to share another piece of information with you. Both at HCRO and Mahindra Holidays, resorts were used as something which was required to sell timeshare and the profit was supposed to come from timeshare. When we took over HCRO and when Kavinder took over Mahindra Holidays, I had made a request that we should get these resorts to close to breakeven without, without, without taking the ASF income because the ASF income is actually for maintenance of resorts. I said only from FIT sales and sale of food and services, et cetera, you should do that. And I'm pleased to say that but for March resorts being closed, we would have been close to the breakeven. And I think Akhila has some figures in this thing, and these used to be double-digit losses in the earlier. So it is not only other operations, we have tightened a very large potential source of income. And going forward, these are things which will help us. I want to draw another thing to your attention, which Akhila, please correct me or you can expand later. In our consolidation, there are 2 large items. There is a ForEx hit of EUR 23.6 million, and there is 116, the change of accounting for lease, it's of INR 20.24 crores. I want to tell you that the loan that we have got for Holiday Club in one of our subsidiaries is backed 100% by ForEx charges. The assets are in euro. The debt is in euro. So there is a natural hedge. Till 2016, the accounting standards allow you to do hedge accounting if the assets and the liability were both in foreign currency, you could net the 2 of us. So then this EUR 23.6 million would not have come. In 2016, they said you cannot take the upside, but you have to take the downside. And this is I can -- I'm on record, this EUR 23.6 million is not a cost because the underlying assets are in foreign currency. And 116 is purely a book adjustment because in the case of Holiday Club, they have long-term lease rental agreement, that's why the figure is 20.24 million. If these 2 accounting changes had not happened, your profit at a consolidated level would have been higher by INR 43.9 crores -- EUR 43.9 million. That means an increase of nearly 48%. In these times, to achieve this is really creditable for Kavinder and his team. We have been, every year from 2016, hit by policy changes of the accounting standards and which has distorted our results. I would request you to please look at the inherent and not the book, like a lot of people have -- a lot of newspapers have said we made a cumulative loss of 200 -- INR 166 crores. You know it happened with every company because the deferred tax asset was created on the basis of 35% tax, and now the carried loss will be 25%. So it is not a loss. You'll have to pay lesser tax. So you are clearing -- carrying the benefit to that extent. Let me end by giving you 1 good news that in going forward, because of this 35%, 25%, as the VO income gets transferred to P&L accounts, your tax -- post tax profit will have an advantage of 10% because we will pick 25% tax as against 35 -- 25-odd against 35-odd. And there is another good news which you will see when the detailed accounts come up. As prudent Mahindra company and prudent auditors, we have provided for tax on 60-40 basis. But we know and our legal adviser -- tax advisers confirm that now with the introduction of ICDS, our taxation should be done on the basis of book accounts. And we cannot take an arbitrary figure of 60%, 40% or 100% of the income. You have to take [indiscernible]. If that happens, for few years, going forward, we will have no cash outflow on tax because of the 60-40 that we have done. And I don't want to get into details, Akhila -- if you want to understand, Akhila will get you things. But I'm telling you, these are positives that are, I would say, reasonably possible, okay? You might say that the IPO will not allow it but we are reasonably confident that at the tribunal level, we should win this because it's part of the law. So my friends, I would request you only 1 thing. Please study our accounts and understand our accounting system and our business model a little more carefully because we have been hit by these drastic accounting changes, whether it is hedge accounting, most of it is on account of the VO income. I told you that INR 5,400-odd crores -- INR 5,476 crores is unbooked income again -- against the carryforward loss of -- carryforward expenses of INR 713 crores. INR 4,700 crores is income realized. Please look at this when you look at taking a decision on our company. As Kavinder said, I have another Board meeting at 11:30, so I'm going to sign off. And I take this opportunity to wish you and your families and all your near and dear ones best of health, stay safe, stay healthy and please use this quality time to spend more time with family these times. This is the best advantage that has come from lockdown that we are able to spend quality time with your -- with our families, please do that. And my male friends, please do share a little bit of household chores because we are becoming like our friends in the west, no domestic staff is allowed to come. With these few words, God bless you all, stay happy, stay healthy. Thank you. Over to you, Kavinder.
Okay. Thank you very much, Mr. Nanda. And I think this was a great opening. We have a big perspective, which is coming in from our Chairman. And I would now move on to take you through the views that we have at Mahindra Holidays, and I will talk a little bit about Holiday Club also.I think let me begin by saying that today as the world comes together to fight the pandemic, we, at Mahindra Group, have undertaken multiple initiatives under both preventive as well as the critical care for the affected people in line with our Mahindra RISE philosophy. As you know, we have developed low-cost respirators to supply to hospitals. We have offered our resorts as temporary care facilities to fight against the pandemic. We have manufactured hand sanitizers as well as face shields for health workers and launched 3 emergency cab services under the brand name Alyte, for the people in need. These are the initiatives that our group has taken across the businesses.I think parallelly, at Mahindra Holidays, we are using this time to get prepared for the new normal. As you know, the hospitality and aviation businesses have been significantly impacted and since travel and tourism contributes to almost 10% of the GDP, the impact is rather widespread. You must have heard about industry associations taking up the issues with the government for various unique measures, whether it is debt restructuring, whether it is the [ implement ] of statutory levies or direct benefit transfer for the people engaged in hospitality sector. These are the things which are today out there all in the news. So I will move on from there to what is our point of view going forward?Our point of view is that once the travel restrictions are eased off, domestic travel will recover faster. Number two, drivable destinations for leisure trips will become more popular. Hygiene and safety will be the key concern, and consumers will make choices accordingly. At these times, we, at Club Mahindra, are gearing up and focusing on the following: when resorts open, can we deliver contactless experiences, whether it is at the check-in time, check-out time and dining experiences. In resort experiences, we definitely need physical distancing, but can we have enjoyable activities with families and friends while remaining physically distant. We will also -- we are also gearing up for best-in-class hygiene and safety standards at the -- in the resort public areas as well as in the apartments. While doing this, what is happening on our customer acquisition side? At this point of time, we are using this time to transform ourselves to a digital world that we are already in. Whether it is about calling prospects through videos and making presentation on videos; whether it is training our people on how to setup video calls with the customers; whether it is training the sales team virtually on the new destinations, unique and interesting experiences in the current reality in and around resorts; or whether it is using the member brand analysis program to assist in closure of sales, we are doing it all. As you know, 3 years ago, we had launched our mobile app. We didn't realize at that time, how handy it will come, particularly in the contactless check-ins and various experiences at the resorts, which will be continuously notified through the app. I want to add also a few things that we realize that we have some unique advantages in this situation -- in this rather sad situation. Our resorts are spread out and our apartment sizes are bigger. So when we talk of social distancing, spread out resorts, bigger apartment size is an advantage. Our resorts are away from the cities and are close to nature, another advantage. Let me now dwell a little bit on what are the strengths that we see in our business model and are we truly unique and resilient. When we look inside, we realize our biggest strength is our member base of over -- our member base over 258,000-plus member families. And we believe that our member base will look forward to holidaying with us, knowing fully well that we will take care of their hygiene and safety, particularly in the drivable distance resorts, and large part of our resorts are at a drivable distance from metros. They are aware that we will be ensuring that while they are at our resorts, we will still deliver the magical moments, while keeping physical distancing in mind. So this is as far as the customer side is concerned, the strength that we see in our business model. The second advantage that we see in our business model is the liquidity position that we have. And as you know, we have 0 debt, and we have grown our cash -- improved our cash position from INR 572 crores to INR 780 crores -- INR 781 crores, and that gives us additional comfort in these trying times. Our deferred revenue pool, which Mr. Nanda had talked about, is upwards of about INR 5,476 crores. And most importantly, it gives clear revenue visibility, and we have mentioned this in our investor deck also for the forthcoming periods. And this we had mentioned in our [ 11 Q2 call, ] will significantly improve profitability, and this is something that we see playing out. Our focus on receivables management, quality member acquisition and execution excellence has resulted in a fairly healthy cash position, which I mentioned earlier. I can also mention that our resilience of our business model is visible through our growth in profit before tax in this quarter. On a stand-alone basis, our profit before tax grew by 27% despite the pandemic situation in March '20. As we speak, our project at Goa Assonora, the brand new resort is coming up. And the -- due to the lockdown, the project has got impacted. Having said that, starting 12th May, with following all the social distancing norms and with local permissions, as you know, Goa is a green zone, we have started the construction again. Ashtamudi is another resort in Kerala, where the expansion will start once we get all the permission. You know we have land banks for building greenfield projects and expansion opportunities in existing resorts are also possible in our scheme of things. Let me move on to the business performance. I just want to bring to your notice that there have been 2 changes in this year. Ind AS 116, which is new accounting standard, was notified on March 30, 2019, and became applicable effective April 1. As you know, this accounting standard change -- has the following -- it does following things to our accounts. There are changes in the balance sheet under Ind AS 116, which requires lessees to recognize lease assets right of use and lease liabilities. There are changes in the P&L account under Ind AS 116. There is an amortization of right-of-use assets and notional finance cost on the lease liability, which substitutes the actual lease rental costs. What it simply means is that you will notice on these rentals come down, but our depreciation and a new element of financing cost comes in. In our business, the impact has been negligible. But in the Holiday Club Resort, the impact has been of the order of about INR 21 crores, adverse impacts. Income tax ordinance, we have adopted the lower tax rates. We took the decision in quarter 4. We are now on a tax rate of 25.1%. The resultant impact as a result of taking this decision is on the deferred tax asset, where we had an accumulated deferred tax asset, which we had to. There was a onetime transition impact, which is what you see of INR 199.73 crores in our stand-alone financial results. And that is what has changed our deferred tax position. Our deferred tax net now stands at INR 248 crores as on March '20 compared to INR 426 crores as on March '19. Let me move on to the operational aspects of the performance. You know COVID-19 has affected our performance in March. We had to shut down almost on a daily basis resorts in line with local advisory as well as falling occupancies. So we noticed that the impact of the COVID-19 in March was especially on member additions and resort operations. The impact on vacation ownership income, annual subscription income, interest and other nonoperating income was minimal. We have added 3,616 members this quarter as against 5,600 odd the previous year. And this has taken our cumulative member base to 202,58,366. This is a year on increase of -- year-on-year increase of 6.1%. Our net member addition count for the year stands at 15,697 members, of course, impacted by COVID in March. By the way, I'll spend a few seconds on member engagement. Even during the COVID times, we have been ensuring that we remain connected with our members. We are running various digital campaigns. And we are noticing that there is significant amount of engagement happening as a result of that. You may remember that we have talked about building our experience ecosystem, and there was significant progress in that in the year that has gone by. And also, the Club M Select, is the program that we had launched, has grown, and we are now adding various wellness offerings in that. Let me move on to resort operations. Our resort occupancies for quarter 4 were at 72.2% versus 83.7% same period last year. Resort performance has got affected, as you know, because of the pandemic. And our resort occupancy, therefore, for the full year is 80.3% for FY '20. While until December, we were at 83.1%. And despite the pandemic, we were able to achieve occupancy of more than 80% for the full year. Inventory additions, we added in quarter 4, 3 resorts: Agra, Mysore and Bangalore, taking our total resort count to 70, and the number stands at 3,732 rooms. With our Holiday Club subsidiary, we have 60 domestic and 51 international destinations. For the year, we moved from 61 to 70 resorts, and I did talk about the room count already. Let me move on to the stand-alone financial performance. I would like to highlight that our income for the quarter has moved up by 1.3% in this quarter at INR 255.5 crores. Profit before tax for this quarter is INR 29.1 crores as compared to INR 22.8 crores, which is a growth of 27.3% on Y-o-Y basis. Not only that, we were able to improve our PBT margins by 232 basis points in the current quarter. Profit after-tax has gone up to INR 30.5 crores as compared to INR 14.4 crores. Obviously, there is a benefit of lower tax rate. But if the tax rate lower benefit had not come, even then our profit would have gone up to [18.7%] profit after-tax, which would be a growth of 29.6%. Total income for the year, as you know, has gone up by 7.6%. Our profit before tax for the full year is at INR 124 crores, which is a growth of 23.7%. And profit after-tax before the one-time transition impact on account of lower tax rate, of course, transition impact is INR 199.75 crores. Even if we had not taken the lower tax rate, we would have been at a profit after-tax of INR 79.7 crores, which would be a growth of 24.8% for the full year at full tax rate. I think let me move on to Holiday Club Resorts. The operations of our Finnish subsidiary, which includes majority of resorts in Finland, small hotels and resorts in Finland as well as in Sweden and Spain, were adversely affected due to COVID-19 during March '20. As was stated earlier, this is a peak season, particularly in Finland, and that has impacted the performance. Having said that, if you look at the year-to-date figures, which is all uploaded on our website. There was a significant improvement in performance in Holiday Club Resorts till December 2019. And we were doing well in January and February also till March affected the performance. As you can see under the Finnish accounting standard, the quarter 4 revenue was EUR 39 million as against EUR 46.7 million. And this was -- this is -- so we attribute about EUR 7.8 million contraction in turnover due to the COVID-19 effect. The profit before tax is therefore at EUR 0.8 million for quarter 4, despite the impact in March as against EUR 5.2 million for the same period last year. I think it is very obvious if March had not impacted the Holiday Club Resorts performance, we would have something very, very significant to talk to you about. For the full year, the Spa hotel turnover has increased by 3% despite taking a big hit in March. And this was backed by higher occupancy and growth in revenue compared to FY '19. Finance cost has reduced by EUR 0.45 million, as loan of EUR 5.5 million has been repaid in the current financial year. The good news for us here is that our debt is down by EUR 32 million from the time we acquired this company. And the consolidated turnover for the full year as a result of the COVID is slightly lower at INR 631.4 crores as against INR 656.6 crores for the same period last year. And the profit after-tax as a result of this, the impact that we saw in COVID, is, therefore, at INR 38.2 crores versus INR 52.3 crores for the same period last year. If I look at full year, the good news for us is that we delivered 58 -- 48% growth year-on-year basis. If I exclude the Ind AS 116 and the ForEx adjustment, that Mr. Nanda was talking about, that's a very significant growth in performance at consolidated level. Just for your knowledge, consolidated profit after-tax, before one-time transition impact on account of lower tax rate, is INR 65.5 crores as compared to INR 59.6 crores last year. At this point of time, I thank you for joining this call and being -- and we are all available for the questions. Akhila and myself are available to answer any questions that you may have at this point of time. Over to all of you.
[Operator Instructions] The first question is from the line of Nihal Jham from Edelweiss.
Sir, my first question was obviously related to COVID. The thought, obviously, I had about the core Club Mahindra product, the 25-year-old and even the 10-year-olds has, is that -- it is a high ticket item in terms of purchase, and it is travel related. In this environment where there is an issue in terms of job losses and reducing income and, obviously, a little bit of scare related to travel. I just wanted to understand in the coming year, what do you think how would the scenario pan out in terms of getting new members on board? And also, if you could comment -- you did mention about your change in distribution in terms of getting members, but just a little more thought on that.
Okay. I think a very fair question and much appreciated. It gives me an opportunity to share how we are thinking about the customer acquisition. So let's begin by just making it very clear that we have 2 segments of our business within the timeshare. We have timeshare customer acquisition piece of the business. And then we have the resort business. I think the resort business, I mentioned very, very clearly the moment the travel restrictions are eased off. And by the way, you may notice that even in China, the domestic tourism is now beginning to -- actually, I don't want to use the word boom, but most hotels are already experiencing 50% occupancy. And even the tickets for the Disney, as they are opening, are being sold out. So there is a big pent-up demand, in my view, that will open up the moment the travel restrictions are eased off, and people want to live with the fact that they have to wear masks, they have to sanitize and they have to maintain distance. If they learn to live with this new normal, they would still want to go to drivable distances, which is where we are present. Hygiene and safety will be key concerns, which, as I mentioned earlier, we will design, and we are already there, as I speak. And we will be best-in-class. That's the other thing that I can assure. So then the members and their guests would begin to come to our resorts. First of all, we have an on-site sales channel. And that is something that we will ramp up. We have already made plans to ramp up the back part of the sales channel. There is a second sales channel that we use, which is face-to-face meetings. And this is where we -- as you know, for the last 3 to 5 years, we have been preparing on our digital journey. We today generate significant amount of leads digitally. That, in my opinion, will continue. In our company, consumer sentiment is a bit, I will answer that part also. So the lead generation, even now as we speak, is going on digitally. Having said that, the thing that we have to master is to convert digitally. I'm not at liberty to tell you what is happening in the month of April and May as we speak. All I can tell you is that digital conversions are happening. Having said that, they are not happening at the pace that we would like it to be because our people are learning and also the sentiment, as you rightly mentioned, is too low. And having said that, what we have done, we are very, very conscious of the fact that there will be a desire, first of all, to travel. There will be a desire to travel to drivable distances. There'll be a desire to be at a brand with a brand which will be conscious of safety and hygiene. If this desire continues and the pent up demand that I was talking about, I think over a period of time there will be a positive that we will see in customer acquisition and consciously using the word over a period of time.Having said, in the meanwhile, while the sentiment is not so good, and while the plans are not being made for holiday, people are definitely talking to us, and they are saying, let things ease off a bit. We are very, very excited to sign up with you. Second thing we are also noticing is there is bigger interest on the lower tenure products. I can comfortably tell you that the 3 year product brochures that we had launched is seeing traction that is seeing traction like we never seen before. Having said that, we are very, very clear that we have a portfolio of products, whether it is a 25-year product or it's a 10-year or a 3-year. And now we are ready to ensure that this portfolio plays out with the hands of the customer. Customers will obviously make their own choices. And I must also share with you that it is a well-known fact in the timeshare world that when people come into the sampler products of 3 years, et cetera, they eventually graduate into the higher order products. So we may go through a phase where we may see more of shorter tenure products being bought by people who will eventually see the experience and the fact that domestic tourism will be the theme, a fact that we are going to be ensuring the experiences happen with safety and hygiene and comfort. And once this is established, which will take some time, the moment that happens, there will be a demand for them to convert them from a shorter tenure to a longer tenure. Because I want to make one point, which we say to our customers, that in these uncertain times, there is only one thing which is settled that Club Mahindra remains committed to serving 258,000 plus members, not for today, not for tomorrow, even for -- we are talking about 25-year tenure. So our whole business model is built on certainty and longevity. And that is something that we believe will put us in good stead in the coming times.
That's very helpful, sir. Sir, I had few questions. I'll just take one and probably get back in the queue that in terms of your member addition of 3,600 for this quarter, would it be possible to break up how Jan and February were and how March did separately?
It's -- as of now, we have not put that out in the public domain, but we take your request, and we will come back. But I can confirm this to you that in March, whatever we had planned to do, we ended up doing probably 35%, 40% of that. So that probably largely explained why we were expecting to grow beyond 5%, 6% and we would have probably grown at least 10%, if not more, that's what we were looking at. And if you say, let's say, we were supposed to grow -- come at 6,000 and because we would have hit 18,000, we were very sure, which is the number that we had achieved last year at a total level. And just this drop has costed us, you can say already at least 2,400 units in March. So that's the kind of drop that we had. And we are very, very clear that had it not been for pandemic we had great momentum, in fact, in the first 10, 12 days around the Holi time. Post the Holi time around March 10, we noticed the problem beginning to happen. And yet, I think in certain parts of the country, there was no COVID-19 and therefore, the momentum continued for a while and then, of course, it peaked up.
[Operator Instructions] The next question is from the line of Aditya Bagul from Axis Capital.
Sir, I had 2 questions. One is when we look at the overall member base, right, 260,000 odd people and assuming 2 weeks of loss of ability to take a vacation, it essentially implies that we have 40,000 odd weeks that we will have to satisfy either during this year or next year. Just wanted some thoughts around how we are going to sort of reimburse the numbers? And if possible, what could be the cost synergies.
Okay. So first of all, I want to give you the comfort, there is really no cost. Let me tell you how it works. So in our case, members can accumulate up to 3 years of their room nights. So we typically have members who have 7 nights, they can actually accumulate up to 21 days. So really speaking, yes, go ahead, Aditya, you want to comment on that?
No. No, sir, I understand that. But assuming that people who wanted to take this vacation in these last 2 months and could not, they could probably -- I understand that they could roll forward, they could go up the pyramid, they could go idle, there are multiple ways that they could use these nights. I'm just saying that if they decide to go through the other channel, for example, they decide to use our partner hotels instead of Club Mahindra property. Is there an additional cost, which is attached?
So yes, so let me explain how it works. So first of all, as far as the demand side is concerned, I don't think that the moment travel restrictions are eased off, there will be a very big spurt in demand. There will be demand. And it will sort of begin to come up. And so there will be a time during which the -- there will be a transition period that will happen. And during this transition period, first of all, we don't see any issues in satisfying the demand because any -- all of them will not come at the same time to holiday. And considering the fact that the peak season, April, May, June is more or less getting over we are entering anyway into a lean season, which was in July, August, September where our occupancies are typically low. And just in case there was this pent up demand and it came in July, this September, we are well geared to handle it. Having said that, the partner hotels will also, of course, open. We have this inventory exchange program that we have. The partner hotels, which we have about 180 of them around the world and, of course, 100 of them in India. And since we are talking India right now, they will also slowly and gradually open. When it comes to the payout as far as from our side is concerned, first of all, we get very, very good price from these hotels and the resorts. And we don't keep any margin and the same price is passed on. But the way we handle it, as you know, there is a room night that the member has and we value it internally. And there is a small exchange fee that the members pay. Now are you saying that the partner hotel demand will skyrocket, and therefore, we will have to make the payment, valuing the room night to the partner hotels, theoretically, yes, but practically, I don't see that as an issue. So as far as we are concerned, we will do business modeling. We don't see this to be of a significant value or impact.
Fair enough. Understood. Understood. Second question, sir, both to you and Akhila ma'am is we've seen a significant reduction in terms of our other operating overheads in Q4, just wanted to understand how much of this is structural in nature. How much is essentially because there was a reduction in terms of resort income and there was 2 weeks of shutdown in March?
I just want to mention this before Akhila can come in with the relevant figure. See, just at a conceptual level, I wanted to make it clear. That's a very good question. And I just wanted to let every participant know that in our business, and this is a strength that we again have, which we didn't talk about, a very large part of our costs are variable, actually. If you run resorts there are costs. If you don't run the resorts, even lighting and electricity, which is a big cost, energy cost, goes down dramatically, okay? And if you really look at the cost which hotels have typically the beds, which we don't have, and then we talk about -- so energy is the other one. And then we come to the people cost. Now if you really look at the people costs, we have structured our compensation, particularly in the front line in sales even at the middle level and senior levels. There is incentive, which gets accrued when the sales happen. So since the sales started to come down, there is that loss of incentive, which is built in into the compensation structure. So in our case, even people costs have a variable component. And that variable component, if the outcomes are not achieved obviously that variable component does not become payable by design. And this is not a system that we designed today, this has been there for many years. So by design, I would say that we are a resilient business because our variable costs are very, very -- they actually come in line with the sales and the moment we pull back because of the pandemic situation, we saw we were able to drop our variable costs very, very quickly. And that is what we are seeing as an impact. And that is why, to some extent, our margins also improved. But I would let Akhila handle this question if you -- if Akhila wants to come in, most welcome. Akhila please give perspective -- your perspective.
And I'm just adding to what Kavinder has rightfully said, in any hotel business, we have 3 main fixed costs, one is the people cost, second is the HLC, which is actually semi-variable, and also third is debt and the interest cost. In our case, we do not have the interest cost, which is known to all of you. As far as the people cost goes, like Kavinder rightly said, a large portion of our people cost is also variable, incentive driven. If you really look at our cost per acquisition were a large portion. And let me say, a majority of the portion is actually variable or semi-variable. For example, we do lead generation activity, we do a lot of engagement activities [Technical Difficulty]
Sorry to interrupt. Akhila ma'am, we are unable to hear you, your voice is breaking.
Give me one minute, let me just check, am I clearer now?
It's just the same, ma'am.
Hello. Am I clearer now?
Yes, slightly better.
Okay. So I was just adding to what Kavinder has explained even our cost of acquisition is actually highly variable and semi-variable. For example, our lead generation activities, it is completely variable. We do a lot of engagement activities for a prospectus and in these times, since you were unable to do some of these activities, these costs have not got incurred. To that extent, I think, a model by design, a large portion of our costs are variable or semi-variable. Marketing cost that we spend on brand building that to some extent is again semi-variable, we do a lot of spends on the digital which is again semi-variable. But apart from that, a large chunk of our cost is actually variable. And therefore, you'll see that the cost has come down in Q4.
Just one question, if I could, incrementally when we're talking about 15,000-odd members, is there a chance you can give us a split of how much is coming from our best product, how many are from Bliss and how many of them are stand-alone 25 years?
Sure, yes, go ahead.
No, I just wanted to tell him that the dominant part, which is my answer which stands in the year that has gone by, the dominant part, and when I say dominant, I mean, very significant and very minor part is coming from the Bliss and GoZest, it is still 25-year product. Akhila, you want to add, go ahead.
No, I agree with that, the dominant portion is still 25, the rest would be Bliss and the 3-year product.
[Operator Instructions] The next question is from the line of Sachin Shah from Emkay Investment Manager.
I have a couple of questions. ASF revenue is a big source of revenue for us for our resort management cost or resort maintenance cost. Are we seeing any challenges on the ASF revenue collection? And do you foresee any of that going ahead? And if at all, then how do we plan to take care of that site? That's one. And second, since we have such a large cash balance of whatever INR 700-plus crores, INR 750 plus crores, any thoughts on how do we plan to utilize because there will be some opportunities coming up in terms of distressed assets or those kind of things. So any first prima facie thoughts at this point in time? And third, Kavinder, you did mention about that there will be a lot of demand for driving locations so do we have our city wise resort wise breakup in place in the sense that suppose if we have 20% of our members from city A, do we have rooms around that city, which is equivalent to 20% of our total rooms? How does it work? Because otherwise, again, there could be a mismatch in terms of the demand and supply that we have. And again, customers or the members may not get the availability of the rooms that they would like to go to.
Okay. Thank you, Sachin. And as usual, your questions are extremely insightful, so let's just handle them one by one. First question was on ASF that how will you handle the ASF collections? So I just want to share with you that the pandemic has definitely made people ask us that whether, some of them, that whether they would like to postpone the ASF payments, but we have been considerate in the sense that we have been saying that, listen, the rules of the membership are that you need to pay your annual fee because that is required for maintenance of resorts and services that we offer. And I must say the good news is that we have seen a very significant response on the ASF collections, including in April, where we had to increase the ASF by about 5.6% because of the fact that the inflation, we have an inflation-linked formula that you are aware of. So by the way, we have some very interesting models. If you pay a certain advance, then you don't get to pay that increase that will come next year. So we have fairly -- some amount of advanced payments also. And of course, there is a late payment fee, which is there of small fee, which is there, which we charge if you pay it late. And by the way, it is important sometimes to engage with consumers and members and say that listen there's an attractive offer that you have if you pay right now. We have to do all of this. But having said that, at this point of time, is to say that members are valuing their membership more than never. They would not like to default. Part of the reason is they also believe, in these times, the best bet after the lockdown eases and restrictions are eased off, is to go to Club Mahindra, number one, because you are confident of the hygiene and safety standards that we will follow, the brand, of course, and the trust that we enjoy. And second, the fact is that we are now going to be a little bit averse on spending money on hotels. So you come to our resorts, you don't have to pay for the rooms. So there is a value that is being assigned, we are noticing. And we are noticing our ASF collections are going on well. So that probably answers your first question. The second question is on distressed assets. Are we likely to look at distressed assets and will we buy them? Answer is a big yes. A very big, yes. At this point of time, there are opportunities that we do see, but we are very careful because we would not like to buy in a hurry. We would definitely like to look. And because of the lockdown, obviously, we can't inspect right now. But there are opportunities coming to us, and we are going to prioritize drivable distance resorts versus resorts which are farther away from the city. Now coming back to the third question that will we -- have we mapped our member demand to the drivable distances? The answer is yes. And we know where the issues are, if any. And that is being addressed by looking at the new opportunities. But I also believe that the rush for travel is not going to be exponential. It will build up over a period of time. And we will get sufficient time to either take new resorts on lease because we are getting a lot of opportunities of that kind also or -- and by the way, prior to the pandemic, we had also lined up few resorts, which we were about to take on lease. And because of lockdown, we could not progress. So by the way that action will also be initiated, which are, again, by the way, nearer to our metros, the new resorts that we were taking on lease. So I feel comfortable, yes, there could be times when there may be more demand than supply in certain periods, let's say, Diwali of this year or for the fact in India, those things may happen. But I feel that we will be probably much better placed than what we have been ever before because of one that we have a very strong pipeline of lease resorts that are coming in. We have our own construction going on in Goa, which should get completed the moment this lockdown ends in about 3 to 4 months, allows them to opened up. So we see significant inventory coming in this year, both on the lease side as well as on the own side. And as a result of that, we feel we are going to be in a significantly better position because we had done lot of work last year and previous year and the fact that they are in drivable distances and the fact that demand will take some time to build up which will also be the time that will be available. And therefore, I feel fairly confident on that aspect also Sachin.
The next question is from the line of [ Taran Agarwal ] from [ Whole Bush Capital ].
I must take this forum to congratulate the team to demonstrate the cash generation capabilities of the business is generated with the tangible change in your equivalents in the last 5 years, 6 years, actually. That being said, as I look at your balance sheet construct, you have almost INR 1,700 crores of debtors, which is almost 30% of your balance sheet in your stand-alone financials relating to which I have the following questions. One, given that the number is substantially high now. And given that this is a discretionary spend and considering the times that we are in, don't you think that it is the best time for you to securitize these receivables? Because holding them now would essentially result in you taking a lending risk, which is noncore for your business?
Okay. So first of all, securitization, we would do if we needed cash. We do not have a need for cash. As you know, we already have about INR 780 crores. Coming back -- lending risk, let's discuss with lending risk. You know really speaking, unlike the other financing companies where there is an asset where they give the loan against, in our case, if you do not pay your membership fee EMI, you are not entitled to use the facilities at our resorts. So we have also -- we have a very strong analytics-based check on the defaulters on the payments. We routinely track the overdue payments, and we have very strong mechanisms to alert in advance. And of course, various methods are used to reach out to the people who are likely to even default. We have analytics-based propensity models also. And we have mastered this art over the years, actually, as to how to reach out to the potential customer and remind that the proposition that they have signed up for is so great because of the fact that they would really get their entire value in 8, 9 years, of the money that they had paid. And after that, they keep enjoying holidays almost for free, which is a fact because that's something that we show to people and there are people who are members who keep telling us this is what they have got. So this is a value proposition. And for smaller, some small time change in your emotion or mood, if you default, you're likely to lose out on this big membership that you have already signed up for. So we have very, very strong models on predictability of the revenue collection. And we are constantly demonstrating to that -- those models in front of our auditors, and we make sufficient provisions as per the accounting norms, which is under the estimated credit loss. And so whatever we report to you are net of those provisions. And despite that, and you can see our profits are growing, our income is growing, our cash is growing. So this is something that I have seen at least over the last 5, 6 years where I have been around and I think over the years, the business has demonstrated how to manage these debtors. And we believe there's a huge positive of these debtors. Let me give you the positives on the consumer side. We don't make any consumer runaround from pillar to post for getting the finances, we finance, number one. Number two, we get significant income, interest income as a result of that. And that's something that we believe we have today, have the financial strength to continue in this part of the business and then -- if you called it as a financing part of business.
So to take your point, in a scenario where the customer has paid for his installments, like the subscription money at the time of adopting the membership and if the dues are only relating to maybe his ASF fee, but if the skew is more towards the installments and less towards the ASF, then maybe perhaps that argument will hold little merit. So from a customer's perspective, okay, if I pay for the product, the INR 4 lakh, INR 5 lakh in advance, then I'm less likely to default for my ASF, because I can't use the facilities for which I have already made that high payment upfront. But if it's vice versa, then I might probably get some issue. So maybe perhaps, if I were to ask you a little differently, if you could probably give me a split between your ASF and installment debtors in that INR 1,700 crores, broad split is all right.
Akhila, we have that split. Am I right?
So we generally don't put this out in the public domain, as we just show the overall level of debtors. The only information is that these debtors are all post the provisions that we make internally.
And I can also add to Akhila that I agree with you that the larger part of the debtors is the EMI part. And I just also wanted to mention to you, one of the reasons we never considered giving this to any third-party and not have this risk on our books is because please remember, we are a hospitality company. When it comes to collections, the way and we have mastered in art of collecting these dues because we want these members to come to our resorts, ensure that they regularly pay annual fee. They enjoy the facilities. So there is a way you deal with a customer who have signed up for a hospitality club membership rather than for an consumer durable loan. So we believe that there's a very, very unique want here. And we believe there is a big income upside for us as a result of it. And we have managed this risk for long enough, and we also believe that our methods of collection and our proposition, brand proposition is so strong that -- and the fact that our provisioning policies are also robust, that this is something that it is worth continuing in this month.
Okay. Sir, I'll probably get back about this again maybe sometime later. There's just one last question that I had. So the HCR debt has come down from EUR 59 million to EUR 17 million, almost EUR 32 million, right? But when I look at your consolidated debt ex lease borrowings, okay, we have around INR 326 crore of debt, which would almost translate to EUR 38 million. So why is there a disconnect then?
Akhila, just explain this.
Yes. Sure, So there are 2 components to the debt. One is what we have referred to as the reduction in debt from EUR 52 million to EUR 19 million, is the debt in HCR's stand-alone books they also have debt in their own books for running their own operations. And what we have been communicating is a reduction in the debt is in their books. Second portion, MHRIL when we invested into HCR, we have done this through a special purpose vehicle, investment vehicle sitting out of Mauritius, and we have taken loans on the strength of our balance sheet in euro in this SPV, that loan still continues, and that is roughly around EUR 70 million. You see a split of number of shares because under the disclosure norms, something goes under current, something goes under long term, so there's a lot of disclosure requirements of split between the two, but it will be roughly EUR 70 million. That would be our borrowings for this investment.
The last question is from the line of Manoj Bahety from Carnelian Capital.
And I wish everyone in your company and family is staying safe. So my first question is like during this lockdown, how you are taking care of our members, especially like when everybody is getting moratorium. So especially on ASF part as well as interest on receivables? And secondly, like during this lockdown period, are you going to extend the number of days expiring also, so just to specifically [Technical Difficulty]
Sorry to interrupt, Manoj we're not able to hear you properly?
Now it is better?
Yes, slightly.
Hello? Yes. So my first question is that during this lockdown, are we thinking of some kind of moratorium in terms of AFS as well as the interest on receivables and as well as little extension is the expiry of the days to the customer. And also in respect of our lease properties, are we getting some moratorium in terms of rental payments to that? That's my first question.
Okay. Okay. Okay. Of course, it has multiple questions, well within, Manoj, no problem, we will -- I'll try to answer that. Okay. See, as far as the EMI, ASF are concerned, let's remain very, very open about the fact that the consumer sentiment expects you to be flexible. And let me assure you being a hospitality player, I did mention a lot about the collection metrics that we have to follow, which are very different from the consumer durable players or banks. So we are very, very sensitive. There is a way to deal with the -- both the EMI and ASF collections. So one of the ways to look at things is that can you give a bit of an incentive for people to pay on time? And you'll be surprised that people are quite excited to look for those small deals if they can get in these times. And if you know this consumer cycle, then it's not about moratorium, it's about can I get some small benefit when I pay on time. So that's what we are focusing on right now. And if someone is very specific saying that, listen, I'm not in a position to pay, where we are on a case-by-case basis, able to adjust the dates. So that is something that we are doing. So coming back to your second built in question, was this -- yes, probably the same in a different question that how are we handling this holiday accumulation part. We had cases where people's holidays were expiring, beyond 21 days, we do not allow the accumulation. And that, again, we have formed the policy, and we have said very clearly. We understand that people cannot holiday at this time. And then we have allowed the extension to that number of holidays, which were expiring. So those days are allowed to be carried forward. So these are the things that we are doing in a very consumer-friendly manner. Our -- and we are, by the way, in constant touch because our member servicing, not even a single day we have been off of the grid, whether it is the app, whether it is the website, whether it is the call centers. Everything is working from the day the lockdown has happened. People are all available working from homes, like do lend a query and it will get answered. I haven't had similar experiences from banks, just to let you know. So it's not that the customer service is also something that we can take for granted. But I can very proudly say that the levels of customer service that we are delivering on timeliness is exemplary. And we are getting a lot of positive appreciation from members in writing as well as in the social media. Did I answer all your questions? Did I miss any question.
It's only last one, the moratorium on the rental properties, if you have taken?
Yes, moratorium on the rental, let me, yes, yes. Now I had a feeling that I missed something. Yes, on moratorium on the rental is very, very simple. I think during the period of lockdown, there is no problem to ask for moratorium and get the moratorium. And that's what we are engaged in. Because I think people understand, all the people have this very deep understanding that the industry is in trouble. So that's something that, obviously, we have relationships. By the way, we have long-term contracts. So for us, our relationships with the owners of the resorts is very simple. We are saying that listen we are here for next 10 years, 15 years, 20 years, whatever is the size of the event of the contract. So we are handling and maintaining our relationship with them in a very, very amicable and positive manner and we are saying listen we will be fair and reasonable, and which is what we are going to be when it comes to rentals. We are not going to sort of -- and the same thing we have done in holiday with our resorts also because there also we had some rent repayments. So I think that's not an area of concern when it comes to dealing with the people who understand that this is a unique situation. And definitely, depending on the capacity of the landlord or the owner, there are solutions being found to this issue. It's not a problem.
But moratorium, in your case, means just deferral or...
So again, it again depends, Manoj. It depends on the size of the resort. It depends on the length of the contract, it depends on the relationship that we have enjoyed over the years. So it is a combination. You would appreciate that in any commercial transaction, you will have to be sensitive to the other side. See, we are a part of group, Mahindra Group. We are going to be fair and reasonable. We are not going to behave in a manner which will affect the relationship and also the fairness. So it depends on the size, as I mentioned, the length of the contract, the size of the property. So there are a lot of variables that go into that, Manoj. I'm very happy to say that things are in control. And there are -- and there is a fair amount of reasonable progress that we are making in that.
Okay. And Kavinder, I have one last question, which is just a extension of one of the questions, which one of the analysts have asked. Like in the current situation, we expect that the [Technical Difficulty]
Can you come again, I couldn't hear you.
So this is just an extension to the question, which one of the last analysts have asked that in the current scenario, when the competition has become very weaker, there are ample good quality assets, which may be available at a bargain or throwaway prices. So internally, are you preparing a task force to identify those opportunities and make use of the surplus cash, which is lying in the balance sheet because one thing which I would like to mention here definitely there is a huge value in Mahindra Holidays stock, if I compare the current market vacation, it has apparent value. But at the same time if there is a good amount of bargain or value which is lying in front of you in coming 6 months and 1 year. Definitely, investors are going to watch you also, that how you are going to use that cash. So just wanted to understand your thought process on that?
Okay. I think we have a very clear view there, Manoj. Our view is very simple that if we get a resort or a hotel property, which is in line with our needs of Club Mahindra, in drivable distances around the key metros, we are definitely a buyer. Having said that, we will not buy something which does not come at the right price. So at this point of time, there is a task force, which is working full-time in this area. As I mentioned in some of the other comments that because of the lockdown we are not in a position to go and see these properties. The moment the travel restrictions are eased off, we will be in a position to take some decisions obviously,which will be in the interest of the shareholders of Mahindra Holidays to get the property, one which are attractive from a consumer standpoint. Second, which are attractively priced. So answer is, yes.
Due to time constraints, I would now like to hand over the call to Mr. Kavinder for closing comments.
I think this has been a great interaction. As I've always mentioned, that we learn a lot by interacting with you. It's an honor and pleasure to be standing in front of you. And we remain committed to deliver on whatever we say here or whatever we have been saying over the years, and we are very, very thankful that you are, by being in this call, reaffirming your faith in our business. And I'm very, very confident that we are not in this business for just 2, 3 months, which is the problem right now or 6 months or 8 months, whatever be the time, but we are here for 25 years and beyond. We are very confident in delivering our magical moments for our member families going forward in the future. Yes, there will be a new normal. We will be prepared for the new normal. And I can assure you that we are at work, while even during this long down, actually working much harder to ensure that we become -- the way we say that we are a unique and resilient company. We will demonstrate to you that we are indeed a unique and resilient company. 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.