Country Club (India) Ltd

‘Key Beneficiary of Increased Urbanization and Consumer

Boom in India’

Recommendation : Buy
CMP : Rs 883
Target Price : Rs 1482
Expected Appreciation : 68%

Bloomberg code : AMI IN

Reuters Code : COUN.BO
BSE Code : 526550
Equity (FY07) : Rs 87.3 mn
Equity (Post Dilution) : Rs160.8 mn
Shareholding Pattern as on September 30, 2007 Face Value (INR) : 10
Market Capitalization (INR mn) : Rs 8095.4 mn
31% 52 Week High / Low : 1110 / 208.70

(Returns %) 1M 3M 6M 1Yr
Absolute 0.47 -1.00 62.72 151.32
63%
Rel. to Sensex -2.72 -13.19 36.15 112.76
6%

0% Rati Pandit (+91 30286406)

rati@nsbl.co.in
Promoter Group MF FII Others
 About the Company…
‰ Country Club (India) Ltd (CCIL) is one of India’s largest leisure infrastructure companies
operating a chain of clubs under the brand ‘Country Club’ at around 186 locations spread
across India. 27 of these clubs are owned and leased by the company and 151 clubs are
operated as licensed franchisees of the company.
‰ CCIL has pioneered the concept of family clubbing in India thereby creating a new
industry – The Family Clubbing and Leisure Infrastructure Industry.
‰ CCIL has been recognized for having the largest chain of social clubs in India by the
Limca Book of World Records.
‰ The company operates 295 guest rooms and food and beverage services at its clubs and
Hotel Amrutha Castle and the revenue from these operations constitutes 11% of the total
revenues.
‰ The memberships at the company’s various clubs and ‘Country Vacations’ its timeshare
division have grown at a CAGR of 24% from 76398 members in FY05 to 117645 members
by end FY07, representing an addition of on an avg. 1719 members every month.
‰ The avg. membership fees also grew from Rs 35,172 in FY06 to Rs 59,000 in FY07, as
the company quickly diversified itself into key metros and urban areas with a larger
population base with higher disposable incomes.
‰ The total revenues grew at a CAGR of 114% during FY05-FY07, mainly driven by the
revenues from member subscriptions which constitute around 89% of the total revenues.

18th Jan, 2008 2 Stock Stance
 Investment Rationale
‰ An Industry Creator –Presence across retail, leisure infrastructure and hospitality
industry- Economic downturns may adversely affect the spending habits and trip frequency
of travelers, but the leisure segment has always held up comparatively well. The company
has a presence in both the retail as well as hospitality verticals by way of its 186 clubs
(owned, leased & franchise) spread across India.
‰ Growing urban middle class and rising income levels - Greater growth in the numbers of
the middle class which is growing by 20 mn every year and strong growth in income levels at
14-15% annually augurs well for the growth of the leisure industry.
‰ Aggressive Growth plans ahead – Recognizing the demand coming in from the middle and
upper middle class population in different parts of the country, CCIL plans to take the count of
its clubs and resort properties from 27 to 100 by FY10.
‰ It plans to concentrate on the Tier-I cities having a larger population and income base and
plans to have 42 properties in Tier-I cities alone over the next 3 yrs with 6 properties in
Chennai, 5 in Kolkatta, 5 in Mumbai and 6 in Delhi. It has around 13 clubs in metro cities
currently.

18th Jan, 2008 3 Stock Stance
 Investment Rationale (Contd…)
‰ The capex for these expansion plans is estimated to be around Rs 7.5 bn out of which Rs 4.5
bn has already been raised by way of its recent FCCB/GDR/QIB placement. The rest Rs 3 bn
will be financed by way of internal accruals.
‰ Entry into the lucrative service apartment space with ‘Country Condos’ – The company
has firmed up a Rs 250 bn project for entry into the lucrative condominium (service
apartment) space. The first service apartment under this project named Nest has commenced
operations in FY07. It plans to set up 1000 units/apartments in the next 2-3 yrs. Out of these,
Bangalore and Hyderabad will be having 250 units each. Opportunities are also being
explored in over seas market and New Jersey, US is a possible location.

18th Jan, 2008 4 Stock Stance
 Factors Driving the Clubbing Industry
‰ Greater Growth in the numbers of the urban middle class and strong growth in income levels
augurs well for the growth of leisure industry
‰ Average remuneration increase of the Indian in 2006 grew by 14%, the highest in SE Asia
and in 2007 the p.c increase is estimated to be 14.5% by Hewitt Associates.
‰ The middle class population in the country is also growing at 20 mn annually.
‰ It is estimated that by 2020 India’s urban population as a percentage of total population will
rise to 40%, with 400 mn people living in 60-70 large cities, each with a population of one
million or more.
‰ Over the last decade the average Indian spending has rocketed from Rs 5745 in 1992-93 to
Rs 16,457 in 2003-2004 and is expected to grow at 12% hereafter.
‰ Under the major heads of consumption the fastest growth came from leisure and
entertainment with a growth of 28.3% in 2006.

18th Jan, 2008 5 Stock Stance
 Timeshare Opportunity lies in Destination India!
‰ Globally there are about 5,800 timeshare resorts in 95 countries with 8 mn families holding
around 11 mn timeshare weeks.
‰ The industry size is estimated at $ 11 bn, of which 65% comes from American and
European markets and Asia accounting for just 16%. However the trend is fast changing in
Asia and the region is expected to be the biggest growth driver for timeshare business over
the next 10 yrs, which will be mainly lead by two fastest emerging economies like India and
China.
‰ In US around 3% of the population i.e 4.4 mn households own timeshare. As opposed to
this in India the total number of households are 210 mn and timeshare families are just
250,000 with penetration level of 0.12% of the population.
‰ Going forward with the rising disposable incomes of the population and increased
awareness and preference for timeshare products, if the timeshare segment continues to
grow at a CAGR of 20%+ (CAGR over past 5 yrs) for the next five yrs then the no of time
share families will double to over 5 mn families by CY11-12.
‰ The World Travel and Tourism Council (WTTC) has forecasted India to be one of the fastest
growing tourist economy projected to grow at a CAGR of 8.6% between 2006-2015
(Montenegro 10.3% and China 8.7%). This boom in tourist activity will provide a boost to the
timeshare industry which has been growing at double the growth rate of tourist arrivals
globally.

18th Jan, 2008 6 Stock Stance
 Indian Timeshare Industry Vs. U.S
India US

1. Timeshare Members -250,000 1. Timeshare Members - 4,400,000

2. % of households holding timeshare – 2. % of households holding timeshare -3%
0.12% 3. Industry Growth CAGR – 4%
3. Industry Growth CAGR – 20%+ 4. Annual Sales (CY06) - $ 10 bn
4. Annual Sales (FY07) - $ 107.5 mn 5. Resorts providing timeshare facility –
(Rs 4.3 bn) 1615
5. Resorts providing timeshare facility – 80 6. Timeshare units available- 176,232
(expected to double in 2-3 yrs) (CY06) +47,000 units estimated to have
6. Timeshare units available – 9000 been added by end of CY07 (Source:
7. Avg. price range of timeshare – Rs 1.5-5 ARDA).
lakhs (25-30 yrs). 7. Avg. price of timeshare - $18,502
8. Key Players – Mahindra Holidays, Sterling 8. Key players - Wyndham Worldwide,
Holiday, Country Vacations, Le Meridian, Marriott, Hilton, Hyatt, Starwood,
Holiday Inn, Best Western, Radisson, Sunterra, Blue Green Corporation,
Orchid, Lotus Suites, Avalon, Orphic and Disney.
Orange County.

18th Jan, 2008 7 Stock Stance
 Overview of Existing Operations of CCIL
CCIL operates 27 properties (owned and leased) spread across 15 Locations in India &
Overseas. It provides state of the art health club, multi cuisine restaurants, business centre,
swimming pool and other facilities in all its properties. The company offers different kinds of
membership to different age groups for its clubs and timeshares for period ranging from 5 yrs to
life time membership.

Sr Location Year of Size Sr Location Year of Size

No Operation No Operation
1 Hyderabad 1989 3.5 Acres 15 Bushbetta 2005 20 Acres
2 Amrutha Castle, Hyderabad 1995 87 rooms 16 Coconut Groove 2005 12 Acres
3 Medchal 1997 5 Acres 17 Babylon, Srilanka 2005 1 Acre
4 Bannarghatta 1997 3 Acres 18 Mangalore 2005 1 Acre
5 R A Puram, Chennai 2000 0.5 Acre 19 Country Kuteeram 2005 4705 Sq Yards
6 Sarjapur 2001 3 Acres 20 Goa 2005 5143 Sq Meters
7 Mumbai 2001 2 Acres
21 Kovalam 2005 2.16 Acres
8 Guindy, Chennai 2001 1 Acre
22 Mango Grove 2006 4.5 Acres
9 Vizag 2001 1 Acre
23 Rock Springs 2007 142.47 Cents
10 Mysore Road 2002 5 Acres
11 Yellhanka 2004 4 Acres 24 Pune 2007 2.5 Acres
12 Sun Valley 2004 5 Acres 25 Delhi 2007 1.27 Guntas
13 Mysore 2004 1 Acre 26 Ahmedabad 2007 34658.7 Sq Meters
14 Lakeside 2005 2 Acres 27 Kolkatta 2007 4.5 Acres

Source : Company

18th Jan, 2008 8 Stock Stance
 Future Plans
‰ CCIL plans to take the count of its clubs and resort properties from 27 to 100 by FY10. It
plans to concentrate on the Tier-I cities having a larger population and income base and
plans to have 42 properties in Tier-I cities alone over the next 3 yrs with 6 properties in
Chennai, 5 in Kolkatta, 5 in Mumbai and 6 in Delhi. It has around 13 clubs in metro cities
currently
‰ The company has entered into an MOU to acquire developed property in Pune comprising
club house, service apartment and open spaces on a piece of land extending to 14 acres.
‰ Acquisition of 47 room “Bright resorts” in Kovalam, Kerala by agreeing to acquire 100%
paid up capital of Bright Resorts Pvt. Ltd for a consideration of Rs 45 mn.
‰ Entered into MOU for development of 8 more clubs in the following locations:
- Bamboo Grove resort – Lonavala
- Country Kuteeram – Lepakshi
- Country Club – Golf Village (land of 118 acres)– Kolad, near Mumbai
- Country Club – Hyderabad Golf Village
- Floating Pagoda – Tirutanni Road near Chennai
- Country Club, Lucknow
- Banyan Tree – Vedic Spa, Penugonda, near Bangalore
- Country Club Kool – Bangalore
‰ The company has recently acquired clubs in Chanakyapuri – Kolkatta, Faridabad in
Haryana, Ahmedabad and a resort named rock spring resort in Cochin all of which have
commenced operations

18th Jan, 2008 9 Stock Stance
 Investment Concerns
‰ As the clubbing industry is directly related to the economic health of a nation, any slow
down in the economy can impact the company and its growth plans.
‰ Any delay in execution of the new projects can have an impact on the revenues and
profits for the particular fiscal year.
‰ CCIL has entered into strategic alliances with ICICI Bank, CITI Bank, Standard Chartered
Bank, HDFC, ICICI Lombard General insurance wherein all these banks credit
cardholders will be entitled to the 0% interest free installments starting from 6 months to
36 months to avail Country Club membership. In the event of rescission or cancellation of
membership by members whose memberships are securitized by banks, the banks will
have to recourse to the company for providing substitute new or existing members, which
can affect the operations of the company.

18th Jan, 2008 10 Stock Stance
 Financial Analysis

‰ Increasing memberships drive up revenues – Total revenues grew at a CAGR of

114% during from Rs 650.3 mn in FY05 to Rs 2854.6 mn in FY07 mainly driven by the
revenues from member subscriptions which constituted around 89% of the total revenues.
‰ The bottomline grew at a CAGR of 340.2% from a net loss of Rs 31.8 mn in FY05 to a net
profit of Rs 333.8 mn in FY07.
‰ The EBIDTA margins moved up from 8.9 % in FY05 to 16.6% in FY06 and 37.3% in FY07
mainly due to the increasing member base and average membership realizations of the
memberships and key costs like personnel, unkeep and consumables and provisions
being very well under control.
‰ Overview of first nine months ended FY08 – The total revenues and net profits grew by
125.6% and 123.3% respectively from Rs 1007.6 mn and Rs 230.2 mn in 9M FY07 to Rs
2273.9 mn and Rs 514 mn in 9M FY08. Income from subscription from members stood at
Rs 955.78 mn. The avg membership realization moved up to Rs 68,000 during Q3 FY08
from Rs 62,000 at the beginning of FY08 and total number of members added during the
nine month period were 27,500.

18th Jan, 2008 11 Stock Stance
 Valuation
‰ CCIL follows a hybrid model where in some cases it offers small accommodation facilities at
some of its clubs and large part of its timeshare members are also members of its clubs for
use of their facilities on a daily basis. So its operations span across both the retail and
hospitality verticals, leaving no direct competitor for the company.
‰ From timeshare perspective, we value the company benchmarking against peers like
Mahindra Holidays and Resorts which has a similar ‘membership driven model’ and is
planning to list itself in order to unlock value and support its growth plans.
‰ At a CMP of Rs 882.5 the CCIL stock is trading at 20.7x its FY08 diluted EPS of Rs 43.1.
This appears to be at a 55.3% discount to Mahindra Holidays, which had been valued at $ 1
bn (Rs 39.5 bn) in a recent stake sale to SBI, which based on our conservative earnings
estimates, works out to 45.9x its FY08E EPS of Rs 10.5.
‰ We believe that there is a case for upside in valuations of CCIL as we near IPO of Mahindra
Resorts. Giving a 25% discount to CCIL we value it at 34.4x its FY08E earnings, the
target price according to which works out to Rs 1482 signifying an upside potential
of 68% from current levels.

18th Jan, 2008 12 Stock Stance
 Financials
Quick Estimates (Rs mn)
FY08E FY07 FY06 9M FY08 9M FY07
Revenue 3005.1 1542.5 650.3 2273.9 1007.7
Growth (%) 94.8 137.2 91.1 125.6 188.0
EBIDTA 1185.7 575.7 108.0 909.3 355.7
Growth (%) 106.0 433.0 256.2 155.6 165.9
EBIDTA Margin (%) 39.5 37.3 16.6 40.0 35.3
PAT 692.6 333.8 141.2 514.0 230.2
Growth (%) 107.5 136.4 544.0 123.3 1256.5
Net Profit Margin (%) 23.0 21.6 21.7 22.6 22.8
Equity Capital 160.8 87.3 87.3 91.7 87.3
Basic EPS (Rs.) 75.5 38.2 16.2 56.0 26.4
Diluted EPS (Rs) 43.1 32.0
PE (x) 20.5 23.1 54.6 27.6 33.5

Source: Networth Estimates

18th Jan, 2008 13 Stock Stance
 Assumptions for calculating FY08 diluted Equity

1. Company alloted 1,880,322 equity shares at a price of Rs 770 to QIB’s in Dec 07.
2. Allotment of 600,000 convertible warrants to promoters and outsiders at the rate of Rs
600 per warrant convertible into equal number of equity shares of Rs 10 each to be
exercised with 18 months from the date of allotment. We have assumed the conversion
of these warrants into equity as on year ended Mar 31, 2008.
3. Allotted 4,32,912 equity shares of Rs 10 each of the company at a premium of Rs 505
per share upon conversion of FCCBs to the extent of US $ 5 million to Morgan Stanley
Mauritius Company.
4. Company raised Capital upto US$ 86.90 Million aqainst the issue of 221,57,065 Global
Depository Receipts (GDRs representing 44,31,413 Under beulty Shares of Rs 10/-
each Issued at Rs 770/- per share. We assume the same to be converted by Mar 31,
08.

18th Jan, 2008 14 Stock Stance
 Peer Comparison
CCIL Mahindra Holiday
FY07 FY08E FY07 FY08E
Total No of Guest Rooms/Cottages 295 295 675 736
Average Occupancy Rate (%) 65% 70% N.A 73%
Member Base 117645 157945 52885 68750

Avg. Member Realization (Rs) 59000 68000 197000 205000

Membership Revenues (Rs mn) 1378 2740 2039 3493

Guest Accomodation, Restaurants & Banquets & other Services 164 265 284 366
Total Revenues (Rs mn) 1543 3005 3860 2323
Growth % 137 95 52 66
EBIDTA % 37 39 30 34
PAT (Rs mn) 334 693 425 863
Growth % 136 108 112 103
EPS (Rs) 38 43 5* 10
P/E 23 20 - -

*Mahindra Holiday FY07 EPS has been rebased on post diluted Equity Capital of Rs 824.5 mn

Source: Networth Estimates

18th Jan, 2008 15 Stock Stance
 Networth Research: E-mail- research@nsbl.co.in
Research Sector E-mail id Telephone nos.
Huzaifa Suratwala Auto / Banks / Shipping / Logistics huzaifa.s@nsbl.co.in 022-30286389
Rishi Maheshwari Information Technology rishi@nsbl.co.in 022-30286389
Rajan Kumar Cement / Pharmaceuticals rajan@nsbl.co.in 022-30286389
Rati Pandit Hotels / Aviation rati@nsbl.co.in 022-30286389
Brijesh Rajvanshi Telecom / Media brijesh@nsbl.co.in 022-30286389
Vishal Sanghavi Textiles vishalsanghavi@nsbl.co.in 022-30286389
Surya N. Nayak Mid Caps suryanarayan@nsbl.co.in 022-30286389
Ashwani Sharma Power / Power Equipments ashwanisharma@nsbl.co.in 022-30286389
Deepak Kumar KS Associate ksdeepakkumar@nsbl.co.in 022-30286389
Rabindra Basu Associate rabindrabasu@nsbl.co.in 022-30286389
Shruti Bhargava Associate shrutibhargava@nsbl.co.in 022-30286389
Smita Suryavanshi Associate smitasuryavanshi@nsbl.co.in 022-30286389
Shashin Shah Mid Caps sdshah@networthstock.com
Amar More Production amar@nsbl.co.in 022-30286389
Networth Institutional Sales: E-mail- dealing@nsbl.co.in
Raj Bhandari / Rameshwar Singh / D K Arora / Ninie Singh 022-22633020/1/2
Disclaimer: The information contained in this report is obtained from reliable sources and is directed at market professionals and institutional investors. In no
circumstances should it be considered as an offer to sell/buy or, a solicitation of any offer to, buy or sell the securities, commodities, or securities/commodities
derivatives mentioned in this report. Trading in Futures & Options, being levearage instruments, may result in higher profits or substantial losses. Networth, and/or its
affiliates, may or may not have position in securities mentioned in this report. No representation is made that the transactions undertaken based on the information
contained in this report will be profitable, or that they will not result in losses. Networth Advisory Services Pvt Ltd, Networth Stock Broking Ltd and/or its
representatives will not be liable for the recipients’ investment decision based on this report.
Networth Stock Broking Ltd. (www.networthstock.com)
Regd. Office:- 5 Churchgate House, 2nd floor, 32/34 Veer Nariman Road, Fort, Mumbai - 400001.
Tel Phone nos. : 022 - 22850428/4/5/6 Fax nos. : 022 - 22856191
Corporate Office :- 143-B, Mittal Court, 224, Nariman Point, Mumbai – 400021.
Tel Phone nos. : 022 - 22836307/8/11 Fax nos. : 022 - 22836313

18th Jan, 2008 16 Stock Stance