Sterling Holiday Resorts - Turnaround Story

Sterling Holiday Resorts - Multibagger In The Making

Sterling Holiday Resorts has all it takes to become a multibagger, albeit with high risk involved, if the plans envisaged by the management fructify.

Sterling Holiday Resorts (India) Ltd, which pioneered the timeshare concept in the country, has embarked upon a turnaround strategy to settle its debts, refurbish its resorts and complete all the pending projects. To strengthen its finances, the company is planning to raise to the tune of $15 million through foreign currency convertible bonds and has set an ambitious plan to build 20 business hotels with a total capacity of 2,000 rooms and 18 heritage hotels at places of religious, cultural and historical interest across India in the next five years.

Addressing a press conference, R Subramanian, chairman and managing director, said a number of favourable conditions led to the revival of its business. Subramanian took over control of the company in October 2004 by buying the shares of the other two promoters. He said that in 1996 the entire investment market including the stock market, fixed deposit market and mutual fund market, collapsed impacting the sale of timeshares. The sale of timeshares plummeted during this period causing huge losses to the company.

After Subramanian took over in 2004, a top management team was set up for capital restructuring, and clearing up liabilities, refurbishing resorts. The company had Rs 211 crore of liabilities at one stage. However, through negotiation with the creditors, the final settlement amount was brought down to Rs 98 crore. The company has already paid about Rs 30 crore. It has funds worth of about Rs 25 crore, which will be paid to settle the debt. The company intends to mobilse about Rs 50 crore to pay the remaining debt by selling its 250 units at various places. However, it will be signing a 25-year lease agreement with the buyers. The company has entered into an agreement with three real estate marketing companies in Mumbai, Kolkata and New Delhi to sell its 250 units in the next three months. Its accumulated losses stand at Rs 135 crore, including depreciation, as per the balance sheet. It plans to wipe out the losses in the next couple of years. Currently, its paid up capital is Rs 24.9 crore. Subramanian and and his family hold 37 per cent in the company.

The company will take up refurbishment of resorts at a total budget of Rs 33 Crore. It will also be spending about Rs 15 crore for the development of halted resorts construction projects and new resorts development. It has set a target of adding a new resort a month for the rest of the year. "The last-one-and-a-half years were good. We have learnt the lessons and we believe that good times are beginning. Only that we will be more cautious and watchful,” he said. The company will soon kick off its marketing campaign. It has chalked out an initial budget of Rs 10 crore and has set an ambitious target to sell Rs 100 crore value of timeshares during the next financial year. At present, it earns about Rs 2 crore a month, he added. For its business hotels project, the company is looking at bringing in a strategic investor.