Thomas Cook India

TCIL is a leading integrated travel & travel related financial services company in the country offering a broad spectrum of services that include foreign exchange, corporate travel, MICE,

Thomas Cook has 3 main businesses:

  1. International Travel a High margin business, low volatility business.

  2. Travel and Forex Business- High Revenue, low margin business

  3. Ikya Human resource- High Revenue, Growth and comparatively medium margin business.

Please go through the following research report with more comprehensive analysis:

Reason forunder-performance

1)Previously Thomas cook did not have a strong promoter to back the company which has changed after being taken over by Fairfax.

  1. Recession in Europe also led to less growth

Proas for investing:

  1. Thomas Cook has been taken over by Fairfax financial which is headed by Prem Watsa who is considered as Canadian Warren Buffet. Fairfax is known to make long term investments.

  2. Over the last 27 years, the FairFax Financial book value per share has compounded by 23% per year,while the common stock price has followed the growth at 19% per year which is big feat .This just gives us confidence on management strength.

  3. Fairfax wants to make Thomas Cook as holding company in India to drive all its buyouts in future.

  4. Also Thomas cook has huge assets in form of prime properties in Mumbai which it may monetize for future needs. This real estate is worth at least 200 crores as quoted in the enclosed research report.

  5. Promoters hold 75% stake.

  6. Strong Balance sheet.

Conas for investing:

  1. Ikya human resourceas seems like a unrelated business which is going to reduce net profit margin in future.

  2. The customer service of franchised offices does not seem to be great

Find below some reviews quoted by customers just to get a hang of business:

Proof of Turnaround:

  1. Thomas cook has added 34 new locations to do its business. It can also ramp up very quickly through franchising. I see very few listed opportunities

  2. Profit after tax has grown by 77% when compared to last year. Please note that growth in revenue has been increased more due to consolidation of Ikya Human Resource results

3)HdfcSec reportexpects the company net sales & PAT to grow by 87.9% & 31.6% respectively over CY12-14, likely to be driven by consolidation of Ikya & a rebound expected travel and forex business. Outbound travel has shown tremendous resilience despite the current economic slowdown and we expect this growth momentum to continue through expansion of portfolio of destinations, product innovation & addition of online facilities. Expected stabilization in INR could help the forex business to grow at a robust pace.

Recent Transactions:

  1. QIP happened more recently at 53.5 during May, 2013.

  2. Thomas cookas promoteras stake was bought for 50 Rs and Retail investors got a price of 64.5 during acquisition.

So Thomas cook seems like a good buy as a stock for medium term(3 years) with a growth expectation of 25% each year.Please

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Prof Sanjay Bakshi has detailed his investment rationale for Thomas Cook -

Point to note is “the Ikya acquisition” which appears negative at the outset - in his view is a much better business when you focus on net revenue margin and not gross revenue margin. One more thing could be that since Thomascook has 40% employee cost on revenue, ikya can reduce this by bringing their expertise - getting low cost temp employees (and managing attrition)

Personally, having burnt my hands on Cox and Kings in the past, though I started tracking Thomas cook a while back (Fairfax inv time) didnt really know if Thomascook was better than Cox&Kings - now I realize the difference in the business model - Cox has a asset heavy model (invested in hotels) while Thomas cook is asset light.





Thanks for sharing the investment rationale by Sanjay Bakshi. It was very informative.

More importantly, i came to came to know about bloated employee cost.

Don’t worry, investing is all about improving the odds in favor of investing.Cox and Kings on a net margin basis and business wise is comparatively bigger and much diverse entity.But huge debt on its balance sheet coupled with madness of doing many acquisitions till now has made me inclined to invest more onto Thomas cook.

I personally have a different view on Thomas Cook. Its a good company with a strong brand franchise, but it can go through a tough time if the travel segment demand slows down.

The operating and net margins are good, but if debt levels go up the company can face a lot of challenges going forward. The competition in the travel business as well as money changing business is high and margins could come under pressure.

Cox and Kings has been seeing some pressure on margins in the last 1-2 years, and its Debt level is too high.

Though Thomas Cook and Cox & Kings have good franchises they are not Warrent Buffet type stock. The only debt-free player in the travel segment is International Travel House - it has a niche franchise though not as great or sexy as Thomas Cook or C&K.

)- it has a strong parentage (from ITC) which is also in to hotels/hospitality, thereby providing captive set of tourists, corporate clients, etc to leverage for travel services.

)- The big issue is that the stock is available on BSE and is classified as illiquid stock and is under Periodic Call Auction System - which means its difficult to sell or liquidate if you need money at short notice. This is the biggest weakness.

)- The seasonal nature of the business affects all travel companies, however, with anciliary services such as money changing, taxi services, domestic holiday packages and other services these companies are able to manage during slow seasons.

A debt- free company like International Travel House is a kind of contra pick in this segment. Though it looks like a small player it could be a Dark Horse in the coming years.

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Hi Sridhar,

The investment theme in Thomas Cook as elaborated by prof Bakshi is much more than a play on travel industry. Recommend that you read the entire lecture and also the comments in the website where he has answered various queries.

  1. There will be rationalization of real assets as Thomas Cook has some valuable real estate which is not necessary for its operations.

  2. They have acquired another business - India’s most profitable staffing com which again has interesting business opportunity considering the urbanization of the country.

  3. Thomas Cook is an investment vehicle for Fairfax - so you get to participate with a player who can get juicy pvt equity deals for you. Their 27 year track record is good.

Finally the forex revenue looks like a stable cash churning business for Thomas Cook. Others do not have this kind of franchise. 50% market share in forex business is huge.

They do not require much capital like Cox and I do not see any debt related issues cropping-up

Valuation at around 14 times cash flow.



Hi Vinod,

Thanks for sharing your counter points.

I do agree that Thomas Cook is not just about travel but also covers various ancillary and related services including forex, HR (Ikya), MICE, etc.

I personally dont like Cox because of its high debt (3x debt equity), which is difficult to sustain if the business sees a slight slowdown.

The acquisition by Fairfax appears positive and its strong financial strength can help in growing Thomas Cook brand.

As of now debt issues are not significant to cause concern, however if the company is pressurized to expand rapidly to generate 2x returns in 3 years, which is common in private equity style of investing, the use of high leverage for aggressive expansion cannot be ruled out. This is just my thought on the future considering the past history of the company and the stock. But if leverage is controlled then Thomas Cook would be a good business to invest in. These are future possibilities so as of now the stock looks interesting.

While the company has come up with steady to decent results, (16% growth in Top line and ~11% growth in bottom line), the outlook looks better with the arrival of e-visas and the expectation around Sterling contributing meaningfully to the numbers.

Request result analysis and/or opinion from Vinod and other Valuepickrs.

The benefits of e-visa will start reflecting from Q1 FY 2016. The outbound tourist inflow of China is more then 50 times that of India so the size of addressable opportunity is huge.

What could be the impact of the impending merger of Sterling Resorts with Thomas Cook? Does the deal look expensive? Will Thomas Cook be able to effectively service the increased equity in the short term?

Is the annual report for 2014 released? Its neither available on company’s website nor on BSE. Whats causing the delay?

Company follows Jan-Dec as financial year. So the 2014 financial year is to end by December and accordingly the annual report for this year will follow. You can find all previous AR’s from the following link

Due to arbitrage available is it worth adding Sterling Holiday or still stick to Thomas Cook ?

Thomas Cook Q2 net profit jumps 47% to Rs 22.2 cr

Thomas Cook has recorded a 47 percent growth in its September quarter net profit at Rs 22.2 crore versus Rs 15.2 crore in the year-ago period.

The companyâs total income increased by 40 percent to Rs 612.5 crore against Rs 436.7 crore, Y-o-Y.

Its EBIDTA was up 30 percent at Rs 55 crore versus Rs 42.4 crore and EBIDTA margin was at 9 percent versus 9.7 percent.

On the segmental front, the financial services business increased to Rs 59.5 crore from Rs 50.9 crore and travel and related services income rose to Rs 68 crore from Rs 56 crore while HR services jumped to Rs 470 crore versus Rs 329 crore.


Note - The consolidated unaudited results for the quarter and nine months ended September 30, 2014 include the consolidated unaudited results of IKYA for the quarter and the nine months ended September 30, 2014 and Sterling for the period beginning from September 3, 2014 and consequently the same are not comparable with consolidated unaudited results for the quarter and the nine months ended September 30, 2013, Thomas Cook India said.


Thomas cook looks like BW type of stock. Long term story but growth rate not above certain limit. Canadian Owner has similar repo like Warren Buffet.

It will be hard to value this stock as it’s now basket of businesses and new business are being added. Why not invest on individual business instead ?


Thomas cook should be valued as a domestic holding company of FairFax.

They seem to have a habit of buying a company at 10 times Free cash flow and turning it around. Here is the reason given for acquiring sterling holidays in 2013 Fairfax Annual report. All in all the promoter is strong and has huge money available to pump in if required.

Thomas CookIndia is acquiring the company for approximately $140 million; excluding the valuable unutilized land, it is buyingSterling at less than ten times the annual free cash flow anticipated over the next few years.

Thomas Cook India is acquiring Sterling mainly because of Ramesh Ramanathan, the CEO of the company (likeIKYA, Sterling will be independently run by its CEO). Ramesh joined the company in 1991 and helped develop theresorts for the next six years. He then spent 13 years at Mahindra Holidays building that business from scratch to1,600 rooms across 32 properties. It is fair to say that Ramesh created the time share resort industry in India. Sterlingwent through some difficult times in the interim and Ramesh rejoined the company in 2011. He has already turnedthe company around and we expect significant growth in the future. Like Thomas Cook India, Sterling will be a longterm beneficiary of the burgeoning middle class in India.

I had received a delivery from amazon in Hyderabad today and the delivery person was not wearing any courier company uniform. When I quizzed him which courier is he from, he had informed that he is an employee of Ikya human capital solutions and working for Amazon.He also said there were 800 people from IKya in Amazon team in Hyderabad. Ikya has a temporary staffing solutions business and if they are indeed providing this service for Amazon, it could be a large addition financially. I would request value pickrs to confirm this news in other cities.

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Are thomas Cook and Wall street finance comparable… both dealing in Forex. Wall street finance available at much lesser valuation…

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I have a lot of conviction in this stock and have done a fair amount of research. No, thomas cook gets a lot of revenue from MICE - organizing outbound tours for corporates.

Yes, Ikya supplies labour to all kinds of companies and as per IMHO, Ikya’s valuation alone should justify 75% of the mcap today. Leaving optionality from growth in TC and sterling as an upside.


Hi Varadharajan,

On what basis are you valuing IKYA? I see with consolidated earnings also Thomas cook doesnt look cheap although it should be a great stock :slight_smile: to own for years

I researched this in and out by doing scuttle butt and am convinced that these numbers are true. 2 years out these numbers should happen easily given the pick up in hiring, pick up in travel and increasing aspirations of Indians

Hi Varadharajan Link: …/…/…/author/varadharajanr ,


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