Mahindra Holidays & Resorts India Limited (MHRIL) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Mahindra Holidays & Resorts India Limited Q1 FY '24 (sic) [ '25 ] Earnings Conference Call. [Operator Instructions ] Please note that this conference is being recorded. I now hand the conference over to Mr. Manoj Bhat, MD and CEO. Thank you, and over to you, sir.

Thank you. Good evening, everyone, and a very warm welcome to our Q1 call. I think as we go into the call today, I have Mr. Vimal Agarwal, our CFO, and other members of our management team are available for any questions if needed. Obviously, you can find our quarterly results and investor presentation on our website and also on the stock exchanges. I'm assuming some of you who have gone through it. I'm going to touch upon a few highlights, and then Vimal is going to talk briefly about the numbers, and then we'll throw it open for questions. Firstly, I think a little bit about the environment. The industry environment continues to remain healthy. I think although it's down from the peak, I think, the last 2 or 3 months, I think we have seen some weakness coming through in the industry. But however, ADRs are still growing. I think over a year-on-year period, it's somewhat plus 3% at an industry level with [ 16,900 ] per room ADR. And occupancy has stabilized at around 60% in May '24. If I look at the other proxy, which is passenger traffic in the domestic market, I think it grew by 6% Y-o-Y in June, and it's finally surpassed the pre-pandemic levels by 10.4%. So overall, I think the overall environment continues to remain positive. Coming to our performance, our performance has been robust. I think profits grew by 19% to INR 45 crores and margins expanded by 110 bps in our stand-alone numbers. This is obviously a reflection of the various measures we've been taking both from a historical addition perspective as well as the various initiatives we have taken. If I look at the other metric around member additions, I think we continue to add members. I think we added about 3,700 -- 3,692 members and crossed a milestone of 3 lakh membership count in the quarter. The highlight is really that there was a big focus on higher realization. And so our average AUR, or average unit realization, is up by 31% Y-o-Y to INR 4.9 lakhs. I think the other thing is that this 3,692 is a decline from the previous additions in the same quarter previous year. And I think the reason is that we are focused on higher AUR. I think that meant some product variant rationalization, some optimization of offers and I think some of the enhancements we have done in terms of our lead management processes. I think this journey has just started, and I think this focus will continue as we go forward because I think ultimately, we are trying to find the right product mix, which has a balance of tenure as a balance of down payment and a balance of the right product mix for the right customer segments. I think from our perspective, the focus is to deliver superior service across touch points. And this, in a way, is leading to this consistent growth in membership upgrades also because we are seeing upgrades also go at a reasonable pace. If coming to resorts and inventory, I think our resort occupancy was stable at 90%. Mind you, this is on a higher inventory base compared to what it was last year about -- we added about net 268 keys. So including that, I think we have been able to maintain occupancy, which kind of talks to the demand pattern and the kind of customer response we are seeing as we continue to add inventory. The goal of reaching 10k rooms by FY '30, I think that's what we had articulated. From our perspective, we are well on track. While some of you might look at the Q1 number as a negative number, but that's a slippage of a quarter. I think on a full-year basis, we are on track. And overall, on a 5-year basis, we are on track to hit the 10k number by FY '30. The approach for this will be obviously consistent with what we have been doing right now, which is we will build quality greenfield resorts in certain locations and also have a combination of capital-light strategies where -- in other locations, where we partner with other people who would be investing while we would be taking on the responsibility of operating and managing customer service in those locations. So that's really the strategy going forward also. And I'm happy to say that I think we are continuing to see a lot of interest from [ inward funnel ] in terms of asking us to partner with these -- with them as well as in terms of potential areas where we could get greenfield development. From a -- the main routes, which we have spoken about in the past, is, of course, existing land banks and new land parcels where we'll build greenfield. Expansion of our existing resorts, acquisition of resorts and then, of course, build-to-suit and leases. I think these are the five main ways we are doing this. I think one of the questions I get often is about how do we fund this. Currently, we have a cash balance of about INR 1,437 crores, and we continue to generate cash consistently year-on-year. So initially, of course, the first order of business would be to use this internal capital to fund the CapEx needs as we go towards the 10,000-room target. And that's something which eventually then finally, if we do reach a situation where that is not sufficient, maybe we would look at debt as an option. In the current quarter, again, we commenced a new expansion project of 54 keys in Tree House, Jaipur. As you know, it's an existing resort, so it's something we are adding to, given the customer demand there. Our 3 ongoing projects in terms of greenfield and expansion is -- there are Ganpatipule in Maharashtra and Theog in HP, I think that's going on track, as well as the expansion in Kandaghat. And so to me, I think good progress on all of that. The last bit I want to highlight is we are working with various governments to partner with them in terms of developing PPP opportunities. As you know, it's a core area for overall, the Indian economy. It's been highlighted by various leaders of various states as well as from the center in terms of how this could be a real growth area for India in the future and -- as we want to be part of it through these PPP initiatives. ESG, I think our big focus on ESG continues. And our target of carbon neutrality by 2040 through EP100, RE100 and science-based targets is something we are journeying towards on a continuous basis. In a quick update, we had 6 new resorts became net zero to waste to landfill in Q1. We had about 10 new green resorts, which are Platinum certified, which happened in Q1. We have increased our solar capacity. Now it's 28% of our total energy demand. This, of course, makes sense from a sustainability perspective, but also is a huge driver for cost efficiency as we become more and more online on this. And 2 of our resorts are net water positive. And in fact, one of our resorts is India's first net zero certified in all 3 categories, net zero waste, energy and water. Quickly commenting on our European subsidiary, HCR. As you know, last year, HCR had gone through a series of setbacks in terms of its performance. I'm happy to say that the situation is stabilizing. In fact, revenue from Timeshare grew 34% year-on-year. However, I think, overall, given the [ Finnish ] economy constraints as well as the impact of the Russia war, we saw some reductions in resort spending. I think the focus is to improve operating metrics there, and that's something which we'll continue to do in the future. The other comment I want to highlight is, of course, Q1 is one of the weakest quarters for HCRO. And I think Q2 becomes a much stronger quarter. So I think going into next quarter, I think we'll understand more about that business. And I'm very confident that on a full-year basis, we will see a better year for HCRO. To conclude, I think the opportunity still exists. There's a huge growth in the economy. There's a change in customer behavior. There is a huge propensity to spend on travel. There's backing from the government in the recent budget also, undertook pledged to enhance comprehensive development of cultural landmarks as well as trying to establish India as a global tourist destination. Connectivity is improving, and I think all of us are reading about it every day, I think. And that's really helping some of these trends evolve much faster. And lastly, supply, I think while there is a lot of demand in certain segments, including the segment we operate in, which is resorts; I think there is not enough supply, and that situation is not going to correct itself soon. So I think there's a huge potential to serve this underserved market. And that's where I think, from an overall perspective, I believe we are well positioned and to take advantage of the full potential. With this, I'll hand it over to Vimal Agarwal, our CFO, to quickly take you through some key financial numbers, and then we'll throw it open for questions. Thank you.

Thank you, Manoj. I'll first cover the stand-alone financial highlights and then follow that up with consolidated financial highlights. So as far as stand-alone is concerned, our total income was at INR 384 crores, which is up 8% year-on-year basis, whereas resort income was INR 94 crores for Mahindra Holidays. EBITDA was at INR 113 crores, which is up 17% year-on-year, and our EBITDA margin also expanded by 220 bps to 29.5%. Profit after tax was at INR 45 crores, which is up 19%. And our margin was at 11.8%, which is, again, 110 bps up year-on-year. Deferred revenue after adding about INR 60 crores is at INR 5,655 crores. Our cash position also improved to INR 1,437 crores. And as of now, we are generating a yield of about 7.73% per annum. Moving on to consolidated financial highlights. Our total income was at INR 686 crores, which is up 5% year-on-year basis. EBITDA is INR 139 crores, up 14%, and EBITDA margin is 20.2%, up [ 160 ] basis points year-on-year. Overall, PAT, which was a consolidated level post absorbing for depreciation, amortization and interest; was at about INR 1 crore. And this year, quarter 1, we are at INR 6 crores. These are the key financial metrics and [Technical Difficulty] if we can open the floor for questions from the investors. Thank you.

[Operator Instructions ] Our first question is from the line of Pankaj Kumar from Kotak Securities.

Sir, my first question is pertinent to the membership additions in this quarter that we have seen, declined around 21% Y-o-Y basis. As you stated that the focus is clearly on the high AUR, so is this a strategy that we are going to follow going ahead? And in that scenario, how do you see the total membership addition for the year?

So thank you for the question, Pankaj. I think the way I would think of it is as we looked at reshaping this, I think clearly, one of the first things we looked at is some of the plans which have been really contributing to the lower AURs. Combined it with, as I said, some of the metrics around down payment and also combine it with, I think, some of the offers we were offering with some of these plans, and I think we actually pruned out quite a few of these offers during the course of the quarter. I think that obviously is a change, which in some cases, obviously brought the impact down, impact on member additions. So the way we are seeing is, I think, I would see Q2 as a quarter where this kind of stabilizes while we keep the focus on higher AUR because ultimately, I think the way I would look at it is there is member addition, there is a quality of revenue metric around AUR, and then there is a total sales number. So if I look at the first one, which is member addition, you're right, it was down about 21%. If I look at the other one, it's 31% up. If you look at the third one, it's about 4% up, which is the total sales. So I think we will have to balance between the two. My own sense is that I think we still don't have a full picture of the year because -- but I think we would try and see how do we get close to the member addition number which we saw in next year and then build from there. At this point, I don't have a number for you from a full-year perspective.

Yes. Sir, my second question pertains to the room inventory additions plan. Of course, we have laid out the long-term goal of 10,000 inventory. So if you can give us some sense like how it is going to ramp up over the, say, next 5 to 6 years? So you see more of a front-loaded or back-loaded, if you can give us some sense? Because that will give us some sense on the membership additions as well. So for the year -- for this year as well for next 2 years, like how do you see the room addition going?

So I think very simplistically, I think if you look at 5,000 for 5 years, that's 1,000 per year; I think the initial 2 years, obviously, I think it will be [ lower ] and it will catch up in the next 3 years. That's the current way we are envisioning it. So from a perspective of current year, I think, as I mentioned, while the Q1 number -- and this is obviously not to be measured quarterly, I think it is a longer period of time because as you know, projects are projects and a month here, a month there is always possible. But as I look at the full year, I do believe that we will definitely exceed last year's addition on a net basis. And when I say net, what it means is one of the things we are doing also as part of this exercise is looking at our room inventory and looking at member feedback on the rooms and using this opportunity to also prune certain rooms or terminate certain arrangements, which we have with our partners. So I think all the numbers I'm talking is net. So I think we will do better than last year. And I think, as I mentioned, my own sense is that we will look at much higher number compared to last year in terms of a net number.

And sir, my third and last question is on the growth strategy that you said it will be through greenfield, brownfield as well as the inorganic. So in the current scenario, when there is a supply constraint, how do you see the options available from the inorganic growth perspective? Are we getting opportunities in that side? And any near-term opportunities in that?

So inorganic, in the current environment, you're right, I think it's probably not a very realistic option. However, I think my -- it is an option which we keep open because see, from our perspective, as we look at inorganic what we would bring to the table is an ability to leverage our 300,000 member base, and that's the synergy which we can uniquely bring to many of these prospects we are -- we would be evaluating. Right now, there are none, I want to clarify. Secondly, I think from a perspective of a broader picture, I think these are opportunities which obviously evolve during special circumstances, which I think, as you correctly said, maybe it's not the right time frame. So that's something we'll be open to. But as of now, it's -- as I said, it was for completeness that I mentioned it, but there's nothing active at this point.

[Operator Instructions] Our next question is from the line of Hrishikesh Bhagat from Kotak Mutual Funds.

Just two questions. First, if you can help me understand this drop in quarterly run rate of member addition? In last 4, 5 quarters, it has been steadily upward of 4,000 plus every quarter. This quarter, it has been lower than 4,000. So is there some change in strategy in terms of member acquisition?

Hrishikesh, yes, I just answered that question in great detail. So I'll just give you key highlights. What we said is we did three things. We looked at our current product offerings and looked at in terms of if we had to improve on average AUR, which products are the ones we should look at in terms of focus and defocus. Second, we said that I think we overlaid something on down payments and what has been the history around that and what -- where can we look at that. And the third thing we did was -- I think there were certain offers in the past, which were throwing in certain incentives, which we relooked at again when we were looking at the strategy. And hence, I think what I mentioned was that obviously has had some impact because it's the first quarter of change. I also said that it will stabilize in quarter 2 and we'll have to measure them from then on because these are changes which take some time to [ populate ].

Okay. That's helpful. And apologies for asking that question. And the second question is, when I look at your resort income, apparently, I think last few quarters, it has been growing at a fairly healthy run rate. And this quarter, obviously, on absolute basis, it's reasonably strong. But clearly, the growth here seems to have lowered at 2% only. So just want your sense, in the sense, is there that ability to probably optimize that, has been hit a limit in terms of resort income? Or do you think we still have levers on increasing that?

So two parts, right? So one is, you're right, if I look at the stand-alone numbers, it's about 2%. But I think if I look at including some of the Indian subsidiaries because what some -- the new -- some of the new rooms have been added in subsidiaries, so then it is 4.5%. Are we happy with 4.5%? No, I think there is a lot to do. I think the way to look at it is that this number should be, in my mind, at least the base inflation plus volume growth. So I think we are well short of our own expectations on this. As we look at this, I think what are the drivers here, right? So the drivers here are, of course, what sort of experiences we can create, which are differentiated in F&B? What are the other things in terms of offerings, whether it is the spa, whether it is things like what we do in Happy Home; and also look at various activities in the resorts? So we already have a program in place, where we are looking at how do we enhance this further. But the right number, in my mind, to look at is 4.5%, not 2% or whatever is the reported number.

Okay. Okay. But just do you feel that there are still levers to increase it? Or do you think there probably somewhere potential there would be resistance from the members in terms of not actual resistance, but just that do you think that purchasing power could get it hit limit in...

No, no. I think the way to look at it is -- let me expand a bit on that, Hrishikesh. So -- and I'll take it with an example. So in one of our resorts, and it's in Varca, we have opened a new restaurant called Flavour Boat, right? Now Flavour Boat is a restaurant which opens I think about 10:30, 11:00, just after breakfast. And it is not offering full meals, it is offering small bites because that's where the market is moving towards. So what was happening is the way to think of it is it's not about increasing the prices or anything from the same number, right? It's that capturing those members who are not participating, in this case, F&B. And how do you do that? You offer them options because they are definitely going to spend, now whether they spend in resort or outside, and then how do you make sure that they spend in resort. And then you follow the pattern of what kind of food offering we don't have. And then can we offer that in a manner, which from a timing perspective, from a meal size perspective, because all of these are preferences, which are very weighted in our resorts, because in our resorts, we have people who take the entire 3-meal package. We have people who just prefer small meals. So I think that's the way to think of it that we will have to create these various things. So that was a pilot we have done in Varca. And if that is successful, I think we will try and replicate it across. The other thing is, of course, things like chat corners, et cetera. So I'm just giving you an example and our thoughts about this. It's not about really increasing the price and all of that, right?

And just here -- I'm not sure whether you answered. Say for -- okay, I will get back into -- I forgot the question. Sorry, apologies.

Our next question is from the line of Nemish Shah from Emkay Investment Managers Limited.

So just again coming back to the member addition question, so I understand the product rationalization that you are doing might hamper the member addition in the near term or for the, say, next 2, 3 quarters. But I want to understand just on a medium- to long-term perspective, do we stick to the member addition target, which will be in sync with our inventory additions, maintaining the member-to-room ratio? Or now on, we'll just focusing more on the AUR? So if you could just highlight your medium- to long-term target there?

So Nemish, I think we will come back with a view on -- because I think there's a lot of work, a lot of work going on in terms of the model. I think it is a great model, which has brought us to this position of strength. But as we look at the changing environment, I think what do we need to change in terms of the model? So in my mind, as I said, inventory is the key. So that's something we are continuing to focus on. In my mind, I think the question is how do we bring down the 56 members per room? Because I think we need to bring that down, bring the kind of occupancy down to a level which is more manageable. And so that there is more availability for members. The last question you're asking, is the focus on quality going to continue? Of course, I think, to me, that is of prime importance. I think who we are targeting, what products and what does that mean? Because I think in a lot of ways, I think one of the things we are trying to do is, are we targeting the right customer with the right product, are we underselling to certain customers? And how do we bring that intelligence, how do we manage that lead? How do we curate leads? How do we gain really insight into what the customer wants. I think that's a journey which will take 2 to 3 quarters. So to me -- I don't know whether that answers your question, but that's the quick thought. And we will expand a lot more as we have gone through the journey over the next 3 to 4 months.

Got it. So just on the occupancy. So according to you, what would be the right occupancy, which is manageable, some sense on that?

At this point, as I said, we are still working through it. But see, if you look at our average occupancy, is about 85%. And with that, I think we are up there. So my sense is it will be below that 85% mark now. How much it will be? We'll have to see. But that's a directional statement. I think as I said, I think we are working through what are the models which will get us there. So from my perspective, the important thing here is quality in terms of what we bring to the table in terms of our customer base, and then to that customer base, how do we deliver superior customer service from all perspectives, from a booking perspective, from an in-resort experience and a post-resort engagement. I think all 3 buckets.

Got that. And just lastly, again, on the AUR front, so should we now kind of assume that going forward, the AUR will range around this 4.9 number, maybe plus/minus, but largely around this number?

Nemish, it's been only 2 months for me in the job. Give me some more time, and I will answer that question, yes.

Our next question is from the line of Sagar Tanna from [indiscernible] Ventures.

I know you've recently taken over and it's, as you rightly mentioned, just 2 months. But any early thoughts in terms of strategy or anything that you would like to change, going forward, both on the qualitative front and on the quantitative front?

So Sagar, I think as I mentioned to Nemish earlier, I think we will come back with a clarity on this, maybe 3 to 4 months. That's what I'm requesting. But let me give you some early thoughts on at least my views, right? So one is, first, if I bucket the strengths, right? I think from a family holiday experience, I think there is no beating us. From an in-resort experience, there's no beating us. And I think that's something which comes out in every survey we do, right? So that's one. Secondly, from a direction perspective, and all of you are aware, I think one of the things which has been pointed out is how do we make the booking process fairly easy. And that's something we are focusing on. So to me, inventory addition remains unchanged. So that's the third element. And then the fourth and fifth element is really -- I think we've started the journey in terms of how do we look at from a sales process, how do we look at potential customers? And then how do we make sure that we are selling the right requirement for their needs and then use that to then actually provide better service through their journey? And I'm being very generic here because, as I said, I think more specifics will come later. So to me, the journey around inventory addition continues, the journey around superior customer service at the resort continues. And we look at other elements of the model and come back.

Sure. Second question, sir, is on our European business. It's very niche geography. And would you think it's appropriate, considering the boom in domestic tourism? Would you want to allocate capital and management resources in continuing that? Or would you want to rethink with an open mind.

So on Holiday Club, I think, first of all, my own sense is that as I mentioned in the opening speech that to a large extent, I think the business is stabilizing because it was going through a series of shock. It was running at -- historically at 12% EBITDA. And then because of COVID, because of some -- the Russia-Ukraine war, revenues were 160 million at that point. And of course, it's down to 140-odd million now. So I think there are multiple things going on there. But from my perspective, early days for me to take a call. As with all things, I come with most things with an open mind. So I'm not close to any possibilities, but too early to decide. So the way I look at it is, from my perspective, the team is very -- the management team there is very focused on operating metrics, very focused on the need to think of alternatives to the revenue loss because of the Russia-Ukraine war. And I think we are looking at potentially -- if I mentioned that, in Q1, we saw 34% growth in Timeshare sales. So definitely some parts of the business are showing some green shoots. But that's -- as I said, I think I would take 2 or 3 quarters more to come back with a detailed plan on HCRO.

Our next question is from the line of Senthil Manikandan from ithoughtPMS.

Just one question. So similar to [ M&M ], where we had clear key metrics like revenue growth and [ ROE ] of more than 18%, so are you planning to have the same kind of revenue metrics in [indiscernible] too? And if you can share it, it will be great.

Senthil, that's -- we hope to get to a clear set of strategic initiatives and metrics as we go through the rethink process. And as I said, that will be probably around 4 months away, is my feel. And that's when we'll come back with it. Right now, I think it is about sharpening the focus on the future. So one of the first things we have started off with this is looking at some of the product mix -- from a current product mix. I think we will look at other things. But from a direction perspective, I think give us 4 months. And I know exactly what you're talking about from an [ M&M ] perspective, how we did it. So I think we are going to approach it very methodically here also.

Our next question is from the line of Himanshu Shah from Dolat Capital.

A couple of questions, sir. One is the [ retirals ] of members has been on a higher side last financial year and one in this particular quarter. Is this the new normal around 1,000 members? Last year was also around 4,000 member [ retirals ]. This quarter was around 1,000 members. Can you provide some color on this side?

So Himanshu, I think from our perspective, the [ retire ] number will go up this year. It's not -- 1,000 is not the right run rate, if I look at this year. Now -- so from my perspective, I think the [ right ] way to look at it is that there are members retiring, but there are options to sell back to them. But the baseline, in my mind, should be higher than the 1,000 per quarter. Probably I would, from a budgeting perspective, probably take closer to 1,200 to 1,300 as a quarterly average.

Okay. So this was a shorter-tenure members, which we sold a couple of years back, which are getting retired? Or ...

That will be also there. So that will also come in, so -- which is where it goes back to some of the comments I made that we are looking at all the products and looking at -- because many of these are ending the tenure and we are looking at behavior of customers during the tenure and then looking at what product tweaks to make, which is part of that journey, right? But this does include that also.

And so maybe for -- in coming couple of years, this trend will keep inching upwards? Or this will be only specific to this year? Or even for the forthcoming next couple of years, similar would be the trend?

2 to 3 years, it will stabilize. So it won't be increasing beyond that. And I'm giving you indicative numbers. Obviously, it could be plus/minus here or there.

Sir. Secondly, on the inventory addition target, which we are having by FY '30, so is that the target for operational inventory? Or both, it would include operational plus pipeline inventory?

So pipeline inventory, when you say pipeline, it is not active? Or is it active? I think that...

Basically, by pipeline, I mean, which is not operational, not available for members. It may be active, but not available for members.

Okay. So in my definition, there are two things. So let me at least clarify my definition, right? So if the resort is live, that is operational, except for room set aside for maintenance, right? So in that definition, that's what I meant. So with the growth also, we will try and be at that 85% number.

Sorry, 85%?

85% number occupancy with the enhanced inventory, that's our goal.

But -- and then the inventory target is of operational or live inventory or including the ones where the project has got commenced, but the resort has not gone live?

No, we can't use the inventory if the resort is not live. So I'm not understanding the question, Himanshu.

Let me try and ...

You're fundamentally referring to the operational inventory only. And we are not referring to inventory which is not live, not operational, not released to the members.

Okay. So by FY '30, the target for 10,000 inventories -- for operational inventory?

Yes, absolutely. Absolutely. Absolutely -- sorry, if that was the question, 10,000 rooms live and available to members.

Okay. And lastly, sir, we are looking at [ accelerated ] room additions. Simultaneously, we are looking to bring down the member-to-room ratio, which would mean the incremental member-to-room ratio on the incremental rooms will be on a lower side. So on -- and which would indirectly imply lower revenue growth and simultaneously higher costs. So how do we planning to manage or balance this out from a growth trajectory perspective?

So I think two or three things. So from my perspective, if you look at it, I think there are two parts to this equation. I think one is the revenue side, as you correctly pointed out, and second is the profit side. I think on the revenue side, as I mentioned, I think I do feel that from a share of wallet capture, we are not capturing enough in terms of the thing. The second is, and I did clarify that our intent would be to bring down the member-room ratio from 56. I didn't say what is the target. That's the one we are working -- doing work in progress in terms of what should it be. The idea being we'll improve probably availability of rooms and then probably then we create a product which then is from a perspective of sales cost and offers, we will start getting some benefits there. So I think that's that thought process. But you're right, if you just do incremental and incremental, the new additions might come at below 52 weeks -- 52-members a room, yes.

And last thing, some guidance possible on the gross membership sales value for the financial year?

I don't think we have ever split that because that's not the right metric, right, Himanshu. See, ultimately, I mean, I'm only being going to service people who are active with me. So measuring a number which is gross, is probably not the right thing to do.

I was meaning the sales value target number or some color possible on that side, including upgrades.

Himanshu, from our perspective, and if you look at, say, long-term financial perspective, what matters really is the net sales because that really flows through all financials, including cash. And therefore, gross number is something which we don't want to really track or discuss. They do, as you know, any other business or industry, there are follow-ups which happen. Here also, it happens, but doesn't really matter. The lead indicator for us is the net sales, which we are recording and reporting.

[Operator Instructions] Our next question is from the line of Ankit from Smart Sync Services.

Congratulations on good set of numbers. Sir, I have been an investor in the company for the last 10 years, and I really appreciate the kind of business model we have, specifically in our domestic business. And I don't have any questions. I just have one concern, which I think nobody has asked in on the call, and I've been asking this repeated time to the previous management also. And since we have a new management now with a new [ CEO ], CFO, this is my request. See, HCRO investment we made in 2016. And if I'm not wrong, it was roughly around INR 600 crores. And after 8 years, we have hardly [ related ] any returns or the cash flows on that. So -- and as we are on track of attending -- achieving a very sizable CapEx in the long term, don't you think it's a good option to at least explore getting out of it and focusing only on the domestic business, which is doing fantastically well, where we have very strong footing, and we can provide every step up the gap? In the opening remarks, you said that initially you are looking for internal accrual and probably we'll have to go for debt when we scale up our -- scale up our CapEx. If we get this fund ready for our domestic business, probably we will not need debt because then our recurring cash flow generation in our domestic business will be good enough for our CapEx, going forward. Just one concern and one question from my side.

Ankit, it's a very good question, number one. So I'll separate the two, right, in a way. They are connected, but they are not connected. So from my perspective, the domestic business, obviously, has a cash balance and has a strong kind of cash flow generation. And that's something which we'll expect to continue. Now coming to HCRO. I think if I look at the HCRO journey, you're right, we invested some money, and I think I spent time on one of the answers in terms of the journey. But the reality is that I think it is not -- it is stabilizing. It is probably not going to be cash, is what our view. But if you go back to -- and the group has used this model, there's category A, B and C, right? So category A was like strategic, we want to keep it. Category B is there is a turnaround, and we should think of it. And then there's Category C, which we definitely don't think we should be in. My sense is that HCRO today is in Category B, where I think the series of series of COVID-related issues as well as the Russia war, I think it's all happened in the bunch of 2 to 3 years. So I think from a bottom of the cycle kind of place, I think we should not probably jump quickly to conclusions. You might have obviously had a 10-year view, and so you are better informed. But from my perspective, that's what I said in one of the previous answers, we will take 2 to 3 quarters. We are working very closely with the management team, and then we'll come back with answers on that. But completely take your point. I understand your perspective.

Thank you so much, sir. That really helps. Thank you so much, and all the best for the future.

Our next question is from the line of Vikas [ Kasturi ] from Focus Capital.

Sir, I was probably one of the first to get into the queue because as soon as you started your commentary, I pressed star and 1, but the moderators give me a chance to speak only towards the end of the call. So I had the same question as the previous participant, sir. And so please excuse me for repeating it. So for the -- probably for the first -- I have been a shareholder, too, in the company for many years now. And probably for the first time, we have a sort of a unique situation, our unique opportunity, where we have the new incoming Chairman, new incoming CEO and a new -- and almost a new incoming CFO, right? So I hope there is going to be a fresh perspective into the HCRO investment similar to what the previous participant spoke about, right, sir? And if you just think about -- even if you take the return on capital of the years prior to COVID, it was not as great as what your domestic India business is generating today. It's like you have a wonderful winning horse in India and sort of a lean horse, and you are like tying them both together, and the outcome is not that great. So my question, sir -- and as a shareholder, it hurts me because the return on capital on the HCRO business is not great. So if you could please rethink that, relook at it, that would be of great interest in me, sir. I just wanted to place before this, even though it's sort of a repetition of the previous question, I just wanted to [ emphasize ] upon this, sir.

So Vikas, I think, first of all, apologies for that. We'll get it checked why you came in early and you couldn't get in first in the queue. But again, very good inputs. And I have nothing to add to my previous answer, unfortunately. But clearly, hear you clearly. And thank you for your long-term support on the stock.

And I wish you all the best in your new role.

Our next question is from the line of Hrishikesh Bhagat from Kotak Mutual Fund.

Is there any thought of at least repaying debt on the HCRO level? Because apparently, the higher interest in euro regions, apparently, has also hit the cash flow profitability there. Obviously, weak environment is there, but that's something -- any thought on that, sir?

So Hrishikesh, I think in line with what I've said to the previous one, I think -- previous questions on this, see, ultimately, the way I'm thinking of it is that HCRO should make cash-positive profits and try to repay the debt, number one, right? So that's at the HCRO level, right? Then we go to a level above in terms of debt we have taken for the acquisition. There, obviously, there are strategies to think about, and we are probably thinking of a structure where it optimizes interest costs overall for the company. That's something which we might go ahead and implement. But fundamentally, the question is one of how does the business improve its performance and what are the revenue streams we have to add. So while we do short-term kind of things on optimization on the overall outflow in terms of the debt cost, I think the main focus is on trying to see how HCRO performs. And that's really how we are thinking about it right now.

Our next question is from the line of [ Dhavnid Chawla ], an individual investor.

Just had a question. I think so by now, we will have a lot of our earlier 25-year memberships which will be closing. So do we track any metrics, where in that there have been renewals of this particular membership? And secondly, I just wanted to know that we are targeting a 10,000-room inventory. Is there a particular number in mind with vis-a-vis that when we achieve that 10,000-room inventory, how much would be the net member count which we are looking at? Currently, I think so it is around INR 3 lakhs. And just one last question. Do we have any corporate partnerships? Or is there any B2B kind of arrangement wherein we probably provide corporates with some kind of a different kind of membership for their employees? Is that an avenue we are exploring?

So let me take the second question first. So clearly, we do have a corporate offering, and it's called Corporate Fundays, where what it does is companies can buy a pool of days and offer it to their employers and benefits. That program, I think, because of COVID and other reasons, I think it was on the back burner. I think that's what we are reviving right now in terms of -- and in fact, we have put an organization again in place to focus a lot on this. The second element of that program is how do we then address each of the employees of such corporates. And last is how do we plug into their own rewards and recognition programs and so on and so forth, where I think clearly, we have a lot to offer in terms of -- it could be just an example of best employee or best salesperson, those kinds of awards. So I think we have a multilayered program, which we have been doing. As I said, it is probably -- during the COVID time, et cetera, it was not probably focused upon so much. And as we have come out now fully, I think we are focusing back on it. Does that cover your question, [ Dhavnid ], should I move to the other one?

Yes, yes. It does cover. It does. Just throws some light on where we are planning to at least revive that programs.

On your first question, I think -- and I think I mentioned it in one of the earlier answers, retirals has not been a big element, overall, for us. And as it becomes bigger, I think we are putting a program to track, and we are already currently tracking, but making a more focused program on tracking how we can repay. Now in my mind, so for example, if company has taken a membership, [ 25 ] or 33 are also there, I think the question in our mind is -- I think, obviously, that person might have [ passed ] 2 life stages in terms of -- as we think of our member profile. So I think the question is whether we should tap the family then or sell it to the same person? Those are some of the details. The short tenure is a very different thing. I think you asked about the long tenure. But on the short tenure, I think it's more of a conventional kind of viewpoint on what do we offer. And that's where I've said in one of my previous answers, that we are looking at that program and saying what's really happened because it's one of those programs which the tenure has ended and we have the complete data. And how do we position that program going forward?

Understood. Just had a follow-up. So just wanted to know that -- I had asked another question with regards to where we are seeing our member number when we achieve a 10,000-room inventory. So do we have any objective on that? Because we have been saying since after we achieved 5,000-room inventory, we have been looking at Mission 10,000. So is there any number which goes along with that 10,000 number, which we are looking at?

So I don't think we have put out a number in the public domain. So -- but in line with some of the previous answers, I think it will not exactly double, it will be lower than double. So that's the only thing I can tell you.

Ladies and gentlemen, due to time constraint, that was the last question for the day. I now hand the conference to Mr. Manoj Bhat for closing comments.

So thank you, everyone, for joining the call. And if there are any unanswered questions -- I don't think there are. But if, please do write to us, and we'll get it answered. And as usual, I think, welcome the ideas, welcome the questions, welcome the feedback. And look forward to interacting with you again soon. Thank you.

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.