THOMASCOOK - Thomas Cook (India) Ltd. Share Price

Management's outlook for Thomas Cook (India) Limited indicates a promising trajectory for FY27, with expectations for double-digit earnings growth due to favorable macroeconomic conditions, such as a projected GDP growth of 7-7.5% and currency stability. Specifically, the management expressed confidence that delivering earnings growth exceeding 10% is realistic.

Key forward-looking points include:

1. Profit Before Tax (PBT): In Q3 FY26, the PBT reported was INR 897 million, a 20% increase when excluding a one-time impact from the new Labour Code. For the 9M FY26, PBT stood at INR 2,852 million, slightly below INR 2,936 million in the prior year, primarily due to a one-off ex-gratia payment of INR 171 million.

2. Total Income Growth: The company reported a total income increase of 8% in the 9M FY26 to INR 67,523 million, with a 5% increase in Q3 to INR 21,866 million. Other income, particularly from foreign exchange float management, grew significantly, from INR 22 crores to INR 40 crores in the current quarter.

3. Segment Performance: The Foreign Exchange division saw EBIT increase by 10% to INR 316 million with margins improving to 41.5%. In the Travel segment, despite macroeconomic challenges, the B2B sector delivered solid growth of 5%, with international DMS growing by 9%.

4. Budget Announcements: Management highlighted the favorable impact of the budget, which included rationalizing the Tax Collected at Source (TCS) rate from up to 20% to a flat 2%, expected to spur consumer spending and enhance the tourism sector.

5. Digital Transition: The ongoing digital initiatives have seen app engagement grow 2.7x, indicating effective digital adoption strategies.

6. Strategic Expansion: The company plans to continue its focus on disciplined expansion and improving returns on capital, leveraging a strong balance sheet (INR 2,500 crores in cash, of which INR 1,000 crores is net cash after debts) for future investments.

Overall, management is optimistic about sustaining growth, improving operational efficiencies, and capitalizing on favorable market conditions.

Q&A Section Summary of Earnings Transcript

Question from Anil Shah: "What is the outstanding number of prepaid FX cards, the total float on those, and the aggregate account balance?"

Answer:
We have approximately 200,000 prepaid FX cards outstanding, with a total float exceeding INR 1,500 crores. Excluding this float, our own cash on hand between various entities is around INR 1,000 crores, net of INR 220 crores of debt, leading to a net cash position of about INR 780 crores. Last year, this cash was around INR 405 crores, reflecting substantial growth.

Question from Anil Shah: "Where did we lose market share in travel, and was it due to macroeconomic factors or other reasons?"

Answer:
Our B2B international segments saw strong growth of 9-14%, but areas like the U.S. and Middle East underperformed, influenced by geopolitical tensions and advisories. Our domestic inbound business remained flat due to earlier travel advisories affecting our pipeline six months out. Hence, the subdued demand didn't result in anticipated sales, but we're seeing a better outlook for the current quarter.

Question from Ravi Shah: "Why is there a discrepancy between the growth in segment revenue for forex at 2% compared to retail sales and education growth?"

Answer:
The growth in retail sales and education refers to sales volume, while forex segment revenue reflects the margin on those sales. The corporate segment saw lower activity which impacted overall forex revenue growth. However, our EBIT grew by 10%, indicating efficient margin management despite pricing pressures.

Question from Mukul Varma: "Do you expect to see double-digit earnings growth in FY '27 under normal macro conditions?"

Answer:
Yes, given the GDP growth projections of about 7-7.5% and currency stability, double-digit growth appears realistic. We aim to not just grow top line revenue but also focus on margin preservation while investing in technology to enhance customer experience.

Question from Mukul Varma: "With 22 resorts under pipeline for Sterling, what revenue and profitability contributions can we expect?"

Answer:
New hotels typically take about 6 months to ramp up and generate steady revenue. As we continue this expansion, we're also noticing growth from existing assets. Margins will remain between 32%-35% EBITDA, with overall revenue increasing through both new and organic growth.

Question from Mukul Varma: "What is your capital allocation strategy with gross cash of INR 1,000 crores?"

Answer:
Currently, our focus is on building a robust balance sheet, seeking technology investments to enhance customer experience. While we continually evaluate opportunities for expansion or shareholder returns, no specific disbursements are planned at this moment, allowing us flexibility going forward.

Question from Haard Joshi: "What is the competitive landscape considering new market entrants catering to solo travelers?"

Answer:
New entrants can create packages, but our strength lies in execution, brand trust, and economies of scale. We focus on delivering excellent on-ground experiences and are investing in technology to enhance customer engagement, setting us apart from nimble newcomers.

This summary captures the essence of the questions and answers during the Q&A session within the provided character limit.