Release Date: May 17, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Thomas Cook India Ltd (BOM:500413, Financial) reported its fourth successive quarter of profits in the post-pandemic era.
- Income from operations grew 28% year-on-year for Q4 and 45% year-on-year for the full fiscal year.
- Profit before tax increased significantly from a loss of INR62 million to a profit of INR607 million for the quarter.
- The foreign exchange business saw a 23% year-on-year growth in income from operations, with EBIT margins improving from 29% to 41%.
- Sterling Holiday Resorts Ltd, a subsidiary, reported a 39% growth in revenues for Q4 and a 67% increase in EBITDA.
Negative Points
- Volumes in some geographies, particularly Hong Kong and Southeast Asia, have been slower to recover.
- Despite profitability, transaction volumes are still catching up to pre-pandemic levels.
- The impact of higher input costs remains a challenge, although it has been managed to some extent.
- The company faces competition from smaller travel agents, especially in popular MICE destinations like Thailand and Malaysia.
- The foreign exchange business experienced a slight drop in wholesale volumes due to the upcoming elections.
Q & A Highlights
Q: Can you provide more color on the ForEx business, specifically regarding the growth and margins? Should we consider the 4Q trajectory as a steady benchmark?
A: Mahesh Iyer, Managing Director and CEO: The ForEx business is large, with annual volumes around $3.5 billion. We expect it to grow 10-12% year-on-year. Retail volumes grew by 18% in the last quarter, and we are focusing on building scale in the retail segment. Margins have improved due to digital initiatives, and we expect this trend to continue.
Q: What is the overall outlook for FY25, considering the normalization of businesses? Do you expect mid-teens growth for the entire business?
A: Madhavan Menon, Executive Chairman: We expect transaction volumes to return to normal over the next year. Our focus is on sustaining margins, controlling costs, and improving productivity through technology. We anticipate continued growth across all business segments.
Q: With elections in the current quarter, do you foresee any sluggishness in performance?
A: Mahesh Iyer, Managing Director and CEO: We did see a drop in inquiries in states with elections, but post-elections, inquiries and conversions have increased. We expect a longer summer travel season this year, extending into mid-August, with no significant sluggishness anticipated.
Q: Can you provide a breakdown of the INR104 crore CapEx for the year and future capital allocation plans?
A: Debasis Nandy, Group CFO: The CapEx was primarily for technology upgrades in DEI and Sterling. We do not expect to maintain this level of spend in the coming years. Future CapEx will focus on technology and upgrading existing properties.
Q: When do you expect the India outbound business to return to pre-COVID levels?
A: Mahesh Iyer, Managing Director and CEO: The B2B MICE segment is already ahead of pre-pandemic levels. The B2C holiday segment's short haul and domestic travel have recovered, while long haul is at 77-78% of pre-pandemic levels. We expect full recovery in FY25.
Q: What is the margin outlook for Sterling, and is there any plan to demerge and list it separately?
A: Vikram Lalvani, Managing Director and CEO of Sterling Holiday Resorts: We expect EBITDA margins to remain in the 34-36% range. Future expansions will be asset-light. There are no current plans to demerge and list Sterling separately.
Q: What is the current contribution of the DMS business to travel segment profitability, and what can we expect next year?
A: Debasis Nandy, Group CFO: DMS now contributes 41% of travel segment turnover, up from 30% pre-COVID. The business grew 27% during the year and is very profitable. We expect continued strong performance in FY25.
Q: What is the outlook for DEI's growth and margins?
A: K. S Ramakrishnan, President and CEO of DEI Holdings: We are focusing on expanding in the GCC, Indonesia, and Malaysia. Our new technology, ReelFeel, will enhance customer experience and improve margins. We expect full benefits of this technology in the next year.
Q: How do you see the seasonality for travel and related businesses in FY25?
A: Mahesh Iyer, Managing Director and CEO: Traditionally, Q2 was the peak travel season. However, we are seeing a trend towards less seasonality, with travel becoming a 12-month activity. We expect this trend to continue, reducing the impact of seasonality.
Q: How do you see margins evolving in FY25, considering expected revenue growth?
A: Mahesh Iyer, Managing Director and CEO: We are focused on improving margins across all business lines. We have benefited from higher input costs and customer appetite for travel. We expect continued margin improvement through cost management and productivity enhancements.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
