Thank you very much. We will now begin with the question -and-answer session. The first question is from the line of Himanshu Shah from Dolat Capital.

Am I audible?

Yes, Himanshu. Hi, good evening.

Sir, my first question is with respect to our Investor Day where we had given a 10 -year vision FY20 to FY30 on the 3x revenue growth. That used to imply some 17%, 18% revenue CAGR over FY25 to FY30, the implied number. This was discussed even last time also, our FY26 revenue growth was 5%. Even FY27 has started on a soft note of 3%. Do we stand by that guidance? Or it is clearly some clerical error or some other kind of error in that particular computation, or just a casual visionary statement without any backing?

So Himanshu, I think there is nothing casual about it. So from a perspective of -- and I had said that time also, it will be back-ended. I think the articulation of the vision was that we will keep member growth limited and focused. We will focus more on broad basing and going to the more market-aligned model. We will add inventory, which will improve member-to-room ratio.

And I think that journey -- if I think of one thing which probably is deviated from where we thought we would be is probably the European performance. But I think from a stand -alone perspective, I think, as I had mentioned before, it will be back-ended. And that's something which I think we will still stand by because I think we are seeing strong strength in the nonmember business, which grew about 30% even in this quarter. And to me, that's where we are. Now whether it would be down by 5%, 10%, those thi ngs could happen. But I think the broad journey and what we had defined remains the same.

So the back ended, it would mean that our FY28, '29, '30 run rate would need to be significantly higher, more like 20%, 25% revenue CAGR. Do we envisage that? Because we are not adding members and members would be accounting for almost 90% of our revenues, 85%, 90%, I would presume. And that line item is not growing at all. So would the nonmember revenue, which would be 10%, 15% currently would be growing at such an accelerated pace? Because 30% revenue growth on 10% revenue contribution is 3% what we have reported this quarter.

So Himanshu, I think you're right. I think as I had mentioned that the member growth will be slow. And then eventually, I think there will be some member growth. And the FIT stream will go faster. If there is a change to that number, I think we will formal ly come back with that change. But at this time, we are still kind of targeting that number.

Sir just a request, I would suggest if management can revisit and come back, it would be helpful because performance of FY26, '27 doesn't seem that may be achievable. In that backdrop, sir, can you just give some guidance, like what kind of revenue growth should we envisage for FY27 or at least management would be targeting? Because a lot of the room portfolio is under renovation, transformation has been ongoing at least for 3 years. And even in the earlier MD's era also, some of the other transformation has been keeping on going. HCRO has been in transformation since acquisition last 12 years. So in that backdrop, can you just provide some revenue guidance at least for FY27 on a stand-alone basis?

Himanshu, we have never given revenue guidance. But I think from my perspective, clearly, as I mentioned, I think H2 would be more of a strong growth coming through, which is what we expect. And as you know that structurally, there is the ASF and member income, which is going to be flattish because it is not going to grow. It's only the resort income, which will start growing and that will start reflecting in the growth numbers.

Okay. And just on HCRO strategic review, any time lines ? Should we expect that FY27, the strategic review should get over? And what exactly are we trying to -- what are the options from a strategic viewpoint of?

I think from an HCRO perspective, there are 2 or 3 priorities, right? So one priority is to actually increase distribution because one of the challenges of the business is that occupancy is much

lower than where it was a few years back. the second priority and which is -- which would mean some sort of a strategic tie-up in some terms to try and address that issue. The second is, of course, if we feel that, that is not a viable option, I think we will look at other strategic options, including potentially some of the actions like the group has taken in the past. But it is too premature for me. And from a time line pe rspective, I think we expect that during the course of this financial year, we should have some clear answers on where we are headed with HCRO.

The next question is from the line of Shreyans Gathani from SG Securities.

I had a few questions. So the first one is on the Keystone upgrades. So most of our new VOI is mainly coming from that. So what percentage of members at this point have upgraded? And how much do we expect that to continue in terms of the upgrades?

So Shreyans, I think roughly, we are upgrading, I would say, about 2,000 to 2,500 per quarter, depending on the quarter because high occupancy quarters are more. And as most of these upgrades happen when they visit our resorts. And so I think it depends a bit on what is the resort -- number of members visiting the resort. But that is a good percentage of -- so it's about 2,000 to 2,500 a quarter. And if you look at our member base, it's a small fraction. So we are not really concerned about the pace. If at all, I think I would see that how do we increase the pace of upgrades because that then brings them on to the same platform because otherwise, we have a mix of multiple types of membership at the same time. So I think does that answer your question, Shreyans?

Yes, yes, Okay. So basically, it's barely any -- like a very small percentage that's already upgraded of the 3 lakh members.

Yes.

Okay. Okay. Sir, second question was on the renovations. So we have 400 keys going on. So what is the longer-term plan like since we mentioned of having our resorts better than what we had provided earlier. So how -- what kind of renovation plan do we expect? And like the -- do you consider that some sort of opex, not increasing sort of revenues substantially given you're just upgrading the rooms. So what is the plan for that longer term?

So I think as we look at upgrades, there are 2 or 3 types of upgrades, right? So one is where we do a minimal upgrade where most of the things are in place, so which is almost -- it takes a short period of time, maybe 2 or 3 months where we spruce up the rooms and work on some elements. And the other extreme is the transformation. So for example, right now, there are 1, 2, 3, 5 -- 4 or 5 resorts under complete shutdown for renovation, which is what we call transformation. So -- which then means that we look at

everything. We look at landscape, we look at reception, we look at the spa, we look at -- so I think the combination of that, I think the transformation agenda will probably be on an average, at least 2 resorts a year as we go forward. And then this upgrade, typically, I think when we finish a round, which I think we are completing, the other types of upgrades will not be very major going forward. Transformation will be the major portion. And then -- so that's the way to look at it from an upgrade cycle perspective.

Got it. So what kind of expenditure do we expect like when you do a transformation like per room or sort of versus...

See it's difficult to say. So if it's a really old resort, we could end up spending INR40 lakhs to INR50 lakhs a key, which then means that we open, we open up the MEP, we open up the rooms, we open up -- that's the full transformation. And typically, that's like if a resort is 20, 25 years old. But otherwise, you could do it as less as INR5 lakhs to INR10 lakhs a key in some other cases. Yes.

Got it. Okay. And on the closures, so this would be the last year of reviewing the partner resorts. Is that the right assumption?

Yes. So by the end of this year, we expect the network to be in the shape we want it to be. So we already have plans and we have given notices. And so that's why I said 600 to 700 keys total this year will be reduced, and we'll add 1,000 plus during the course of this year. So...

Got it. The last question on the signature resort. So the Theog resort has been under construction, has been delayed. So any update on that? And when do we start like marketing on that and what's the strategy, if you could give some color?

Shreyans, what we have done is we have done another study of what is the cutting edge of luxury, if you will. And I think based on that, we are making some changes to the way the resort is coming out. And so there is an element of -- I wouldn't say delay, it's about deliberation, making sure that we are getting the first product right. As of now, I think this will be probably in the second half of F '28, somewhere in probably the fourth quarter is what we are targeting. which was originally supposed to be. So it's about -- my sense is about 3 or 4 quarters behind where we thought it would be. But we felt that it is time well spent. So we have got some of the more international consultants in to get a review of the product, and they are working on it as we speak.

Got it. So it's basically 1.5 years, 3Q FY28. Is that correct?

Okay. So are we looking at just that? Or are we parallelly going to start work on another resort or just start that and...

Another resort, and I won't tell you the destination right now, but another resort is in late stages of design in terms of the layout, etcetera, which is going to be a second resort. And hopefully, that we should be able to break ground on that in this financial year if everything goes according to plan. And then there is a third one, which is in early stages of design, which I think is something which we are working on. So I think there are 3 going on in parallel. Of course, Theog is the most advanced, followed by the second one, which, as I said, is in, I would say, mid-stages of design. And then there is a very early stage kind of the third one is also in the works.

Got it. And these would have faster completion time lines, I would assume, right?

Yes. In terms of just the design process, it would be faster because as I mentioned in Theog, I think we actually did a full study of where to position the resort given the growth in the market in the luxury segment and the number of players. And that's ta ken us some time. I think it will be faster from that perspective. But otherwise, construction time lines typically will be 2.5 to 3 years typically for a resort of this type.

The next question is from the line of Dhvaneet Savla from Savla Family Office.

I had 2 questions. The first is on our stand -alone business. I understand that we are currently reviewing the keys and we have removed certain the keys from our portfolio this quarter, and we are planning to do so ahead. Does that still mean that we are going to target the -- going to reach the target we had set in 2030 of 10,000 keys? And within that, now that we have more offerings in the Keystone, how are we looking at expanding, giving more options to the Keystone members to travel? Are we planning to go even beyond the target set by 2030? And my second question is on HCRO. I know that we are still under strategic review and all. But the last quarter, you had mentioned that there were certain payment partners or channel partners you were discussing to improve the business over there. Has that gained a little bit of traction over there?

So there are some discussions on. And so -- and of course, you know some of these discussions are prolonged and there are commercial terms and operational terms. So I think as I said, we are speaking and we are evaluating multiple options that all I can say on HCRO. On your first question, just to give you some color, if I look at what our investment committee has approved, I think today, as we stand today in terms of the pipeline, that takes us to about 8,200, 8,300 keys. And this, I'm building some slippage because typically, from signing to closing, so our actual funnel is much larger, which has been approved.

In addition, we are evaluating about 2,500 keys, which are in early stages. So from that perspective, there is a good degree of confidence that the 10,000 keys number is still very visible. And that just gives you an indication of where we are in the process. If I look at the distribution out of this, probably some of the locations we are building. So for example, we are currently building Undi or Ganpatipule. We are looking actively at Koyna is the next one, which we will pick up. So -- and then there are a lot of partner and leased resorts in the mix.

Just a small follow-up. So you mentioned about building new resorts. I have understand that we are building one in Goa also. So can you tell us like because we have already have a lot of our portfolio in Goa and how do you arrive at a decision that you want to build another one in Goa?

No, no. So we own 3 in Goa today. We are leasing one more. And another one we are adding is also not owned. It is managed.

The next question is from the line of Aryan Sonthalia from AK Securities.

Yes. So a couple of questions. Firstly, the employee benefit expenses and the other expenses, those rose well ahead of revenue this quarter and pushed you into a loss. So on the levels you actually control, what's the plan to bring employee and other costs back in line with revenue and get back to flat and then growing? And on the HCRO front, it has been underperforming for the past couple of years. And in this quarter, the revenue grew 5.7%, but its loss nearly doubled to INR67 crores. So what drove the cost escalation? And where does the strategic level stand now that we are in FY27? Any plans to exit the European business?

So let me answer the first question. First of all, that increase did not put us in the loss. There is still a profit in the India business. So as I mentioned, the reasons for some of those movements. So if you look at the other -- if I look at the broad cost items which have moved, I think there is inventory which I think increased about, give or take, INR10 crores inventory cost, which is combined in multiple line items here because we have rental, which is for the inventory we have depreciation, which is for owned and there is depreciation for the leased and then there is finance cost, which is the Ind AS accounting. So -- and then if I look at the other areas which went up, as I mentioned, there were some GST- related impact and some solar policy changes, which was about INR3 crores when I compare to the last year. Then as I mentioned, there are some workforce cost increases, which we are investing in competency, which is about INR6 crores. There's a branding and consultancy kind of charges, which we are paying for as we are going through this MSR design, Mahindra Signature Resorts. That's about INR2 crores. And then, of course, there were annual increments which happened in Q1, which is the quarter that shows up. So it's a combination of multiple small items. And as I mentioned, as I look

forward, some of these, we are investing ahead of time. Some of these are probably -- for example, if I look at the rebranding costs, I think it will come in Q2 also and then possibly in Q3, but then it will start going down because we are going through that whole exercise. And so some of these are kind of temporary in nature. And some of these will start producing - - because even in the transformed resort or transformation resorts, we still have costs and workforce. We can't make it down to 0. So -- but -- so the cost kind of remains, the revenue comes down. And so there's multiple reasons. As I said, the best way to look at it is what I explained in the beginning, 30% of the profit variance has come from the transformation resorts not producing revenue. 20% of the profit variation came from the new resorts, which will start producing. Another 25% came from the capability building and branding investment, which -- and regulatory is about 15% -- 10% to 15% of the profit variance, which is coming. And because that's how we look at the business, not particularly from that cost line perspective.

A question on the dividend position. Since the AS 115 transition in 2019, the company hasn't been able to pay dividends due to the INR1,509 crores transition difference despite being profitable and cash rich. So any update on that front since we haven't heard on that matter in a while?

So I think in F '26 -- sorry, F '27, we will be in a position of not being able to pay a dividend. I think the earliest we can probably consider a dividend is going to be F '28 at this point in time. Yes.

The next question is from the line of Rushabh from RBSA Investment Manager LLP.

I just heard that you mentioned that there is some delay in the Theog resort. Can you just give some insight in terms of percentage? Is there any cost overrun in their project? In terms of percentage? Can you share anything?

So the cost overrun will not be a significant . I think it's more about the time overrun. The cost overrun because what we are trying to do is we are kind of upgrading some of the interiors and so on and so forth and reworking. So there will be a cost overrun maybe of 5%, 10% overall, but not more than that is what we visualize at this point because of these changes we are making.

Okay. And what did you mention on the HCRO? I have missed it, I guess. But what is your strategic point now? Are you planning to exit or finding some -- another strategic partner? Or what is the course of action there?

So I think I said that all options are open, and we are actually engaging someone to help us with it, whether it is partnering, whether it is -- so we'll evaluate all possible options and then come to a decision. And I also said that we expect that during the course of this year, we should come to a conclusion of what we need to do.

Okay. So basically, the whole point was Club Mahindra as a brand. It was very relevant, say, 10, 15 years ago. And now I understand we're trying to make it revive or make it a more premium luxury brand. But somehow, I feel that we're not able to fully leverage or capitalize whatever has happened last 4, 5 years during post -COVID travel boom. And the next 4, 5 years, I just want to ensure that how strongly are we in a position to capture our earlier legacy?

So I think that's a good question, Rushabh. So from a perspective of the brand, I think we keep looking at feedback from our members. So I'll evaluate it from multiple perspectives, right? So first, from a member perspective, I think while -- if I look at the feedback we're getting from members -- from a resort perspective, I think we get very high satisfaction levels across the board. On the membership, I think there were constraints and restrictions. So that's why we have introduced Keystone, which addresses most of those concerns. And that should really help in terms of addressing that. So -- and we are still adding quite a few members from a new member perspective at a significantly higher premium compared to what we were in the past. So to me, that does indicate that there is brand salience. As I said, we are doing -- now we have started the rebranding and some spends around that to get more focus on the brand positioning in the market, which should ideally help in terms of that. If I look at the nonmember business, I think the satisfaction sc ore are much, much better than members today. And these are, of course, a smaller subset. And the growth we are seeing, I think last year, we saw that business grow 40%, of course, off a lower base. As I mentioned, this quarter, it has grown by 30%, which is as good as any other brand in the market in terms of the growth. So I would say there is work to do in terms of the brand, but it is not that it has lost relevance or it is about increasing the relevance and accelerating the growth rather than the brand having lost relevance. So I would just correct your question and an swer it that way.

The next question is from the line of Pranav from Rare Enterprises.

As we are going to add more and more rooms in the model, and we are also going to be fully based in terms of member addition and we are not going to push through sales, that means that the inventory available for market-linked sales is going to be more and more as we go forward. So can we share some strategy what you are going to do in that part of inventory? Also, can you share something which is currently showing the traction in the sa me? And how are the rates in that part of inventory as compared to, say, other hotels in the same area? Thanks a lot, sir.

So Pranav, that's a good question. So if you look at -- and I gave you the growth numbers as I answered the last question. And I think if I look at the growth, I think there were 2 or 3 things which we did. One of us was -- one of the first thing was there was no awareness around that we also have a market -linked model. And I think we have created that awareness across channels and across, for example, we are now more active on the OTAs.

We are more active with the various intermediaries in the channel. We are also activating some links in the wedding mice kind of things. And these are all important because, as you said, as we add inventory, I think there's a lot of room availability, which is going to come up, which then has to be fulfilled through these channels. The second thing on rates, I think my own sense is, it is very, very comparable today to what the member rates are. But given the fact that we give preference to members, some of the best most yielding days are not available to the FIT business today, whic h will change over a period of time as we have more rooms. So given that, I think that's a good outcome. And if I look at the realization compared to last year, it has jumped about 10% and that's another focus that we'll keep moving up yield even in that business. I hope that answers your question, Pranav.

Perfect, sir. And I must congratulate you that you have identified almost every problem in this model. And like we need to be patient. I understand that. And congratulations because I can feel the difference in resorts. Thank you.

Thank you. Thank you, Pranav.

The next question is from the line of Yash Jhurani from Qode Advisors.

Just had a question on Keystone. So now, Keystone, you see, we are marketing buyback as a feature rather than disclosing it as an obligation. So that is a first for the business. So I had a few questions on the same specific line. What are the actual terms in that whole [inaudible 0:43:23], eligibility period, the pricing formula and the cap on aggregate?

Sorry to interrupt, Mr. Yash. Your voice is not audible. There's some disturbance at the back.

Sir, Keystone, we are marketing it as a buyback feature rather than disclosing it as an obligation, which is the first for a business. So I had a few questions under that. So what are the actual terms of the eligibility period, the pricing formula and the cap on aggregate buyback? The second one being under [inaudible 0:44:00].

Yash, you're breaking up again.

Your voice is breaking again. Are you using a handset?

Were you able to hear the first question?

First part I heard, which is what was the follow-up on that? What are the questions?

Yes. So under the Ind AS 115, I think this would be considered as a refund liability. So how much of the INR5,500 crores of the VO that is in the deferred revenue is subject to the buyback? And the reason I ask this is to understand that what exercise rate of this kind of buyback will this tactic create a cash flow event in the company?

So first of all, under all accounting norms, whatever you're saying is probably not valid. Secondly, I don't think we are selling it as a feature. It might be mentioned, but the main feature is probably simplified product, wider choice and you have the options to do multiple rooms. So there are a set of benefits, which we are not having in the old product. Third is from a perspective of what we felt was that when we looked at the previous product, we had a cancellation fee, which was pretty steep. And we felt that it was probably not in the best interest of the customers. So hence, we have brought it down significantly. And I think today, if I look at it, it's about down to, I think, a minimum of, I think, 30% and then prorated after that depends on the usage you had. And we obviously have done a check on the accounting elements. And since the proportion of cancellations is a very small number relatively, it's not that everybody is getting -- asking for a cancellation. So to me, that also is a mitigant -- and we have analyzed something which from various perspectives. And I don't see any of the challenges you're mentioning coming through. And our cancellation rates are dipping as we speak, and our retention rates are going up every quarter.

The next question is from the line of Aniket Bora from Namoh Stockbroker Private Limited.

I have two questions. So just wanted to understand, does non -member business somehow cannibalize the member business because the a bility of receiving service to a non -member doesn't reduce the decision to take up a membership?

So Aniket, obviously, this is -- I mean, it's a very wide spectrum of members and prospects we sell to. There will be a certain category of members who will definitely say that if it is available openly. But I think the way to think of it is, if you look a t the advantages of the membership, beyond, of course, the membership amount, there are a lot of membership privileges which you get in terms of just at the resort and so on and so forth. And I think to me, for example, in this new product, we also have breakfast included, so on and so forth. So I don't -- my opinion is that there is -- and this is -- most global models have this, that there is a viable market -aligned model and a viable membership model and mix is where the world is going, including globally. And so that's something which I think that's an evolution. And as I said, as we add inventory, this question of availability for members and then the second question is about attractiveness for members is about really demonstrating value. And I think we are able to do that consistently, especially if you go into later years. So for example, if somebody had bought a product 10 years back and compares it with today's prevailing rates, I think there's substantial value which is being delivered. And that's something which I think we -- a lot of people realize, a lot of the existing members realize. And that's something which will continue into the future.

Got it. Another question that I had, I understand that we are reviewing the European business. But I just wanted to get a sense. Has rupee depreciation further made it difficult to make it viable? And has that played a key role in further making the problem more difficult to solve?

I don't know whether that is a factor. Just from a reporting perspective, of course, if you are reporting a loss, the loss increases because it's now measured in more rupees. But apart from that, I don't see that as a challenge. I think the key things here are the levers for the business in terms of occupancy increase and what is the right kind of partnership, which will help that. The key thing is that as we look at potentially various pieces of the business, what is the right kind of solution for each piece of it. And the last one is, I think we have quite a bit of inventory from the past years. And how do we figure out a model to monetize that inventory because technically, the company owns the inventory. And so that's something which is the third element which we are looking at. And so those are things and then who is the right partner and what is the right option for the business.

Just one more small question, if I may?

Please go ahead.

Yes. Just wanted to understand our new plans that I see, because I'm a member myself as well - - have breakfast included, right? That's what I see in these plans. Now just wanted to understand, does that somehow reduce the net resort income in the later years to come as the membership of these two plans increase?

So what will happen is that if you look at potentially amortizing it, yes, that will be the natural thing. But I think the way to think of it is as we will probably make it linked to some sort of a model which eventually every year, this will also go up. So the mix across buckets is what will play out like in the current model, right? So, even membership, you can argue that it is -- as we go into the latter years, it might not be profitable. But when you look at the mix, it is profitable. I think that's the way to look at it, even the breakfast piece of it.

For a company P&L, will it be -- is the first option better? Or is the second option that we've given to customers better on a P&L basis for us? What is...

I think we have always gone in favor of the customer. So I think the way we thought of it is that as we move down this chain and as we reduce cost of acquisition, which is reducing every quarter, I think we have to pass some of the benefits to the customer so that they find the value. And in that, we will then make -- be better off because of the volumes which will come through.

Thank you, everyone, for joining the call. And I think if there are any questions which are unaddressed, please do write into us. We will make sure that we can address those questions. But thank you again for attending the call and having a patient hearing. 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.