Diversified profits

Aditya Birla Nuvo (ABN) has been one scrip which has been one of my favorites over the last few years and one I believe one can really buy and forget. I had written about this at the end of Dec’ 12 here and more recently here and here.  From 1100 on 31-Dec-12, this is now quoting at 1800 an annualized return of nearly 30% over the last 2 years. And the story is not over yet. In fact, things have only improved in the last 2 years. Look at the businesses it is in and the prospects of each in the next few years.

With AB Nuvo (ABN) acquiring Pantaloons from Future group, the retail foray now looks more promising than before. They now have a play on all segments of the market from the upmarket Louise Phillipe/Van Heusen to the mid-market Pantaloons (which I can say from personal experience, does offer value for money clothing).

And the talk of Birla being interested in e-comm foray (the latest happening thing in India right now) also augurs well for ABN. This is yet a nascent market, and whoever moves first s likely to get a firm grip on the buyers (just look at Flipkart, Myntra etc). 

With Modi Sarkar’s reforms push, I believe it will only be a matter of time before Insurance reforms come in when foreign players with deep pockets can have a majority stake in their JV with Indian partners. And Birla Sun Life is doing reasonably well in this market, though it can’t be called a top player. Birla may well monetize his stake in this by selling some of it to Sun Life, who having been in the Indian market for a decade or more now, may well be happy to go for it.

Add to that the sound performance of Idea over the last few years. It has certainly earned its place among the cellular service providers in India. And from the results over the last few quarters, Indians are taking more to data on the Net than voice. And here, Idea has certainly done well. With e-commerce boom and more e-governance etc. the e-boom should continue for some time to come and players like Idea can certainly ride on it.

So all in all, most of the businesses of ABN are well positioned for excellent prospects in the coming time and should bring a lot of cheer to the shareholders, something which is long overdue.

Also, any value unlocking they do thru demerger/listing/spin-off of one or more of their numerous subsidiaries, Financial Services and Insurance being at the top of the queue,  will be an added bonus.

Profitable holidays

Mahindra Holidays & Resorts (MHR) is a Mahindra  group company with a very strong franchise in vacation ownership under the brand name Club Mahindra. Mahindra group holds 75% stake, FIIs hold about 12.5% stake and DIIs hold another 5%. So together more than 90% of the shares are owned by promoters and institutions. There can’t be any other comforting factor than these figures. This also means that the public holds merely 7-8% of the shares.

This is a very attractive company with 41 resorts and nearly 2500 rooms. Recently they have acquired a 19% stake in a leading European vacation ownership company Holiday Club. This company also has 32 resorts and 2800 rooms. And the agreement between the 2 is that in the next 2 years, Mahindra Holidays can own upto 74% stake in the company, thus making it a majority owned subsidiary. If this were to happen Club Mahindra will become a vacation ownership company not only in India but also globally.

This company had launched in IPO in June 2009 and has been growing ever since. 5 years ago, it had a turnover of merely 390 crore which has grown to nearly 770 crore today.And considering India’s demography, this growth can only accelerate in the coming years.

This company operates in markets where there is a huge young population with high aspirations. This has resulted in their membership count growing annually by about 18000. And considering the new govt’s focus on travel and tourism, MHR is bound to grow handsomely.

5 years ago, they had launched an IPO @300 per share. And despite growing ever since, this is now quoting even below that value at about 275 This only goes to show the Indian market’s utter disregard for fundamentals - management as well as growth quality. And they haven’t given any bonus or split since then.

Another thing worth noting is that recently Thomas Cook, the global travel and tours company acquired Sterling Holiday Resorts, a much smaller player in the same industry. And if u consider the valuations and price at which this deal was done, MHR is really quoting at dirt cheap levels.

This can only mean that with a very low floating stock, excellent growth prospects and cheap valuation,  Mahindra Holidays will only give handsome returns in the months and years ahead.