Metrics cut 1
- FY27 double-digit earnings growth target withdrawn (previously guided as achievable under normal conditions)
Thomas Cook (India) Ltd - Q1 FY27 Earnings Call Summary
Tuesday, August 4, 2026, 3:00 PM IST
Event Participants
Executives
6
Mahesh Iyer (MD & CEO), Vikram Lalvani (MD & CEO, Sterling Holidays), K.S. Ramakrishnan (MD, DEI), Debasis Nandy (Group CFO), Brijesh Modi (CFO, Thomas Cook India), Urvashi Bhutani (Head of Investor Relations)
Analysts
5
Anil Shah (Insightful Investments), Chetan Mahadik (Systematix), Madhur Rathi (Counter Cyclical Investments), Shivam Gupta (Trinetra Asset Managers), Soumya Shidhore (Insightful Investment Managers LLP)
Financials & KPIs
| Metric | Reported | Commentary |
|---|---|---|
| Consolidated Revenue | ₹21,530 million | -12% YoY; decline driven by GCC-based subsidiaries (DEI, Desert Adventures) impacted by West Asia conflict |
| Profit Before Tax | ₹885 million | -21% YoY; primarily due to underperformance of Desert Adventures and DEI |
| Group EBIT (ex-GCC entities) | +8% YoY | India operations remained stable YoY excluding DEI and Desert Adventures |
| Forex Segment Revenue | +6% YoY | EBIT +8% YoY; EBIT margin healthy at 45.3% |
| Forex Education Turnover | +36% YoY | Key growth driver; supported by NBFC partnerships and Study Buddy Card program (launched with Visa) |
| Forex Retail Portfolio Turnover | +8% YoY | Outperformed market; LRS industry travel forex declined 8% while education industry declined 27% |
| Travel Segment Revenue | ₹17,106 million | -14% YoY; decline confined to businesses impacted by West Asia conflict; India B2B and B2C healthy |
| Travel Segment EBIT | ₹405 million | -50% YoY; majority of decline from Desert Adventures; cost base could not adjust at same pace as revenue |
| B2B Travel (63% of reported travel) | ₹11,192 million | -13% YoY; MICE grew 14% to ₹5,420 million; DMS declined 31% |
| MICE Turnover | ₹5,420 million | +14% YoY; 110+ groups managed (50-2,400 delegates); 23% domestic / 77% international mix |
| Corporate Travel Revenue (net) | ₹350 million | +7% YoY; gross turnover crossed ₹7 billion (+15% YoY); added 7 new accounts |
| International DMS Revenue | -33% YoY | Desert Adventures -89%; Allied TPro -40% due to softer US inbound; Asian Trails stable |
| Sterling Revenue from Operations | ₹1.7 billion | +21% YoY; best quarter ever; 26 consecutive profitable quarters |
| Sterling EBITDA | ₹620 million | +21% YoY; EBITDA margin industry-leading at 37% |
| Sterling PBT | +30% YoY | EBIT margin 28% (+200 bps YoY); operating free cash flow +30% |
| Sterling Occupancy | 77% | +700 bps YoY despite 17% increase in room inventory |
| Sterling Average Room Rate | ₹7,809 | +10% YoY, all-time high; RevPAR +20% YoY |
| DEI Revenue | ₹1,307 million | vs ₹2,097 million in Q1 FY26; 50% business dependence on Middle East impacted |
| DEI EBIT | -₹152 million | vs +₹106 million in Q1 FY26; also impacted by closure of non-profitable China site and end-of-contract in Bahamas |
| Forensic Digital Penetration | 23.5% | vs 20.4% last year; website transactions +38%, TC Pay bookings 3x, WhatsApp +80% |
| Travel Digital Penetration | 21% | Q1 FY27; driven by AI-enabled customer journeys and chatbots |
Geographic & Segment Commentary
Foreign Exchange: Delivered positive performance with segment revenue +6% YoY, EBIT +8%, and EBIT margin of 45.3%. Education portfolio grew 36% in turnover, outperforming the underlying market (industry education forex declined 27% per RBI LRS data). Corporate business turnover grew 9% on higher wallet share and new client acquisitions. Digital penetration improved to 23.5% vs 20.4% last year. Launched one currency card with zero markup and zero cross-currency conversion charges; expanded borderless forex card to 28 currencies.
Travel - B2C Leisure: Domestic segment grew 29% YoY; short haul grew 6% (21% excluding Middle East), with Japan, Korea, China up 38% combined and Vietnam/Cambodia delivering >2x growth. Long haul declined 28% YoY due to West Asia conflict, with April near par with last year but deteriorating through May-June. Strong traction in spiritual travel via Bhakti and Darshan platforms. Demand shifted from long haul to short haul; ATV delta between long and short haul is 20-25%.
Travel - B2B (MICE & Corporate): MICE recorded +14% YoY growth with turnover of ₹5,420 million; managed 110+ groups from 50-2,400 delegates; 23% domestic/77% international mix. Corporate travel grew 7% in net revenue (₹350 million) with gross turnover crossing ₹7 billion (+15%); added 7 new accounts across financial services, automobile, IT, insurance, education; air transaction volumes +14%, international air +17%, hotel volumes +33%.
DMS (Destination Management Services): Reported 31% decline to ₹5,422 million. India DMS stable in traditional lean quarter. International DMS -33%: Desert Adventures revenue -89% due to geopolitical disruption; Allied TPro -40% on softer US inbound; Asian Trails stable with China growth; Private Safaris grew 17% (Southern Africa) and 4% (East Africa).
Sterling Holidays (Hospitality): Record quarter - best ever; 26 consecutive profitable quarters. Occupancy up 700 bps to 77%, ARR up 10% to ₹7,809 (all-time high), RevPAR +20%. Room revenue +29%, F&B +15%. Portfolio of 78 resorts/hotels (~3,800 rooms) in 65+ destinations; 28% YoY growth in properties, 17% in rooms. Visible pipeline of 35+ properties representing 2,000+ additional rooms. Debt-free with cash reserves exceeding ₹3.7 billion. NPS above 81%.
DEI (Digital Imaging): Challenging quarter with revenue of ₹1,307 million (vs ₹2,097 million) and negative EBIT of -₹152 million (vs +₹106 million). 50% of business dependent on Middle East, heavily impacted by geopolitical issues. Cost optimization initiated: closure of non-profitable sites, enhanced labor control, overhead rationalization, renegotiated Middle East partner terms. Net assets employed ~₹243 crores; technology upgrade completed in 2020-21 expected to last 10-12 years.
Company-Specific & Strategic Commentary
Digital & Omni-channel Expansion: Forex digital penetration reached 23.5% (vs 20.4% last year) with website transactions +38%, TC Pay app bookings up 3x, and WhatsApp channel +80%. Quick Commerce distribution via Blinkit now in 12 cities with 34% increase in cards sold. AI-powered initiatives including conversational chatbots, AI-enabled quality monitoring, AI assist solutions, and voice automation across travel operations.
Product Innovation: Launched one currency card with zero markup and zero cross-currency conversion charges. Expanded borderless forex card portfolio to 28 currencies with 60 new global currencies added; introduced 10% value back proposition. Study Buddy Card (Visa partnership) gaining traction in education segment.
Network Optimization: Operationalized new forex counters at Delhi Airport Terminal 1 and Terminal 2 while optimizing branch network for productivity. Strategy is opportunistic at airports - only entering when commercially rewarding, not for brand visibility; calibrated approach to airport presence.
Technology Investment in DEI: Completed major technology upgrade in 2020-21 (over 50-60% of ₹243 crore net assets invested) expected to last 10-12 years without substantial ongoing capex; positions DEI for 20% ROE long-term target in normal market conditions.
Guidance & Outlook
| Metric | Guidance / Outlook | Commentary |
|---|---|---|
| Long Haul Travel (H2 FY27) | Expected to be better than H1 | April-June deficit of 28-30% trending slightly lower in July-August; conversion improving; desire to travel remains strong |
| Travel Segment EBIT Margin | 4-5% range (working range) | Internal working range; gross margins stable/growing in outbound; take rates (B2B+B2C) targeted at 14-15% long term |
| DEI EBIT Ratio (normal year) | 6-7% on sales | Based on normalized year without geopolitical risk; Q2 cost optimization benefits expected with further impact in Q3 |
| DEI Long-term Return | 20% ROE target | Group-wide target; every business expected to deliver at least this level |
| DEI Middle East Recovery | ~30-35% recovery in July (vs 20% April-June) | Revenue recovery largely determines earnings quality in subsequent quarters |
| Sterling Growth Pipeline | 35+ properties / 2,000+ rooms visible pipeline | Asset-right approach balancing owned, leased, managed properties while maintaining capital efficiency |
| FY27 Full Year | No formal guidance given | Management declined to provide full-year revenue/PBT guidance given ongoing geopolitical uncertainty; endeavor to deliver good full-year outcome |
Risks & Constraints
| Risk | Context |
|---|---|
| West Asia Geopolitical Conflict | Direct impact on Desert Adventures (revenue -89%) and DEI (50% business dependence on Middle East); long haul outbound travel declined 28% YoY. Management noted conflict shows no improvement during the quarter; recovery in Middle East at 30-35% in July vs 20% earlier. Uncertainty continues as geopolitical statements emerge daily affecting travel decisions. |
| Cost-Revenue Mismatch in Downcycle | Desert Adventures volumes immediately impacted but cost base could not adjust at same pace, making profitability impact more pronounced. DEI implementing cost optimization with 30-60 day lag; benefits expected in Q2/Q3 FY27. |
| US Inbound Tourism Softness | Allied TPro revenue declined 40% on softer inbound tourism trends to the US, weighing on international DMS performance. |
| Climate & Supply Chain Headwinds | Rising operating costs, challenging supply chains due to global events, and potential climate-related disruptions flagged by Sterling management as headwinds despite strong demand tailwinds. |
| Short Haul/Long Haul Mix Shift | Demand shift from long haul to short haul destinations (ATV 20-25% lower) creates revenue mix impact even when volumes grow; management noted this affects reported revenue growth comparisons. |
| Regulatory - TCS Impact | TCS reduced to stable 5%; management sees no significant impact on customer acceptance - viewed as cash outflow rather than price given refundability; not a material driver either way. |
Q&A Highlights
July/August Travel Trends and Short Haul Margins
- Question: How has underlying demand trended in July/early August excluding geopolitical impact? Do newer destinations (Japan, Vietnam, China) carry comparable margins? (Chetan Mahadik, Systematix)
- Answer: Long haul trend improving - July and August showing better conversion vs April-June; deficit percentages trending lower than the 28-30% seen in Q1. Desire to travel remains strong; Europe/westbound will remain key market. Short haul destinations seeing double-digit growth with margins similar to long haul, but average ticket price is 20-25% lower on short haul, creating mix impact on revenues. (Mahesh Iyer)
Airport Counter Strategy
- Question: Going forward, will the company prioritize airport counters over traditional branches? (Chetan Mahadik, Systematix)
- Answer: Airport presence is opportunistic, not a focused strategy. Entry at Delhi airport was based on commercial construct fit. The company does not use airports for brand visibility/advertising given strong brand recognition. Will evaluate airports only if terms are mutually beneficial commercially. (Mahesh Iyer)
Sterling ARR Growth Drivers
- Question: Was 9-10% ARR growth driven by real rate growth, geographic mix shift, or premium property segmentation? (Chetan Mahadik, Systematix)
- Answer: ARR grew 10% while volume grew to 77% simultaneously. Sterling has moved from mid-scale to a multi-segment portfolio (upper upscale, upscale, upper mid-scale), enabling more fungible rate expansion during demand uptick. Domestic travel remains key source business. Combined effect drove RevPAR +20%. (Vikram Lalvani)
DEI Capital Employed and Return Profile
- Question: What is capital employed in DEI, ongoing capex requirements, and realistic ROCE/EBIT on normalized basis? (Anil Shah, Insightful Investments)
- Answer: Net assets employed in photo imaging ~₹243 crores. Normal year EBIT ratio expected at 6-7% on sales. Technology upgrade completed in 2020-21 (over 50-60% of the investment) expected to last 10-12 years - no substantial ongoing capex; periodic inputs needed every 10-12 years only. Long-term target of 20% ROE. All DEI expenses absorbed in segment (no common overhead allocation). (K.S. Ramakrishnan, Debasis Nandy)
FY27 Travel Growth and EBIT Margin Guidance
- Question: Assuming Middle East situation normalizes, what growth in travel top line and EBIT margin range should we assume for FY27? (Anil Shah, Insightful Investments)
- Answer: Refused formal FY27 guidance given ongoing war uncertainty with new statements emerging daily. Long haul deficit percentages have come down; short haul and domestic momentum strong but ATV mix impact exists. Reasonable to expect H2 better than H1 if situation remains constant. Working with internal EBIT margin range of 4-5% for travel; gross margins stable or improved in outbound segments. (Mahesh Iyer)
Travel Segment Margin Trends and Take Rate Improvement
- Question: How should we view the travel segment's margin decline over past two years despite 20% cumulative growth? What drives take rate/EBIT margin improvement? (Madhur Rathi, Counter Cyclical)
- Answer: Business is seasonal/cyclical with no straight-line growth; overperformance in one market is often underpinned by underperformance in another (₹200 crore top line shortfall in Middle East this quarter). Gross margins stable; take rates across B2B and B2C targeted at 14-15% long term. B2C allows pricing leverage; B2B competitive with limited pricing power. Input costs (airlines, forex) have risen, requiring tactical pricing calls to keep demand cycle going. (Mahesh Iyer)
TCS Rate Reduction Impact
- Question: How has TCS reduction to 5% impacted pricing and customer acceptance? (Madhur Rathi, Counter Cyclical)
- Answer: No significant impact observed - TCS is a cash outflow that customers claim back, not a price. The 5% rate seems lower compared to previous slabs, providing marginal positive perception benefit, but no measurable demand impact. (Mahesh Iyer)
FY19 vs FY26 Travel Segment Growth Comparison
- Question: Travel segment flat since FY19 - what growth rate can this division deliver over next five years under normal conditions? (Madhur Rathi, Counter Cyclical)
- Answer: Comparison distorted by COVID period (FY22 revenue ₹1,047 cr vs FY19 ₹6,060 cr). FY23 revenue was ₹3,600 cr vs FY26 ₹6,700 cr - ~3,100 cr growth in three years. Corporate/MICE growing 12-15% YoY; DMS units (excluding Middle East & US) grew 8-12% this quarter. Long haul portfolio shrunk post-pandemic with growth shifting to short haul/domestic (lower ATVs), masking revenue growth in reported numbers. FY26 was not normal - impacted by Pahalgam attack, India-Pakistan war, Middle East disturbances, and Trump presidency. (Mahesh Iyer, Debasis Nandy)
Forex Disruption Threat from New Entrants
- Question: With new online technology-based disruptors (BookMyForex etc.), is there disruption threat to the forex booking business? (Madhur Rathi, Counter Cyclical)
- Answer: Digital adoption at ~24% with presence across all digital channels (WhatsApp, app, website). Competition has always existed; Thomas Cook positioned as market maker rather than follower with trusted brand, robust product portfolio, and continuous innovation. Declined to comment directly on competitors. (Mahesh Iyer)
FY27 Double-Digit Earnings Growth Target
- Question: Earlier management guided double-digit earnings growth in FY27 was achievable under normal conditions. After Q1 decline, is that still possible? (Shivam Gupta, Trinetra)
- Answer: Could not confirm at this point given the operating environment. Q1 delivered stable numbers in some markets despite headwinds. Endeavor remains to deliver a good full-year outcome, but formal forecast not possible given ongoing uncertainty. (Mahesh Iyer)
DEI Cost Optimization Impact Timeline
- Question: Will Q2 results reflect the cost optimization measures given the 30-60 day lag mentioned last quarter? (Soumya Shidhore, Insightful Investment Managers)
- Answer: Yes - Q2 Q2 will show differences in cost provisions with drastic corrections visible. However, revenue recovery is equally important: Middle East recovery at ~20% April-June, improving to 30-35% in July. Revenue side remains the key determinant of earnings quality in subsequent quarters. (K.S. Ramakrishnan, Mahesh Iyer)
Key Takeaway
Thomas Cook (India) reported a challenging Q1 FY27 with consolidated revenue down 12% YoY to ₹21,530 million and PBT down 21% to ₹885 million, driven entirely by West Asia geopolitical disruption impacting DEI (revenue declined from ₹2,097 million to ₹1,307 million; EBIT swung from +₹106 million to -₹152 million) and Desert Adventures (revenue -89%). India businesses demonstrated resilience: forex segment grew 6% with 45.3% EBIT margins, MICE grew 14%, corporate travel grew 7% (gross turnover +15%), and domestic leisure travel grew 29%. Sterling Holidays delivered its best quarter ever with revenue +21% to ₹1.7 billion, EBITDA margin of 37%, occupancy up 700 bps to 77%, and ARR up 10% to ₹7,809, supported by a visible pipeline of 35+ properties. Management is executing cost optimization at DEI (benefits expected from Q2) while focusing on Middle East revenue recovery (July tracking 30-35%). Digital penetration improved across both forex (23.5%) and travel (21%) segments with product innovations including zero-markup currency cards and the Visa-backed Study Buddy Card. Management declined formal FY27 guidance given ongoing geopolitical uncertainty, pointing to improving long haul trends (deficit trending lower than 28-30%) and stronger H2 expectations, while targeting 4-5% travel EBIT margins and 14-15% long-term take rates as the Middle East situation normalizes.