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CRISIL upgrades rating outlook of Thomas Cook India to stable

Reflects healthy recovery in business momentum with pandemic impact waning, growth in the Company’s Forex & Travel Services and Balance Sheet strength.

MUMBAI – CRISIL has revised its rating outlook on the bank loan facilities of Thomas Cook (India) Limited (TCIL) to ‘Stable’ from ‘Negative’, while reaffirming the company’s ratings at ‘CRISIL A+/ CRISIL A1’.

The upgrade in outlook to ‘Stable’ from ‘Negative’ reflects the Thomas Cook India Group’s robust recovery and business momentum post pandemic, healthy liquidity resulting in negative net debt position, and strong capital structure. The ratings also factor in the Thomas Cook India Group’s dominant position in the Foreign Exchange business and strong brand equity in travel-related services. A key consideration included the strong support from Fairfax, driven by the high strategic importance of Thomas Cook India Group.

Driven by high pent-up demand, increased vaccination coverage and positive consumer sentiment, the business witnessed healthy recovery. Revenue from operations recovered sharply to Rs. 2,198 cr during H1 FY23 from Rs. 4,015 cr of H1 FY20 (~255% of FY22 revenue) owing to strong recoveries in all business segments. As of September 2022, Forex recovered 82% of pre-pandemic levels, overall travel service (domestic & international) recovered to 78%, Sterling Holidays recovered to 141% and Digiphoto Imaging Solutions (DEI) to 130%. The Thomas Cook India Group’s revenue is estimated to further over the near to medium term driven by continued momentum witnessed across all business segments.

Operating margins recovered to pre-pandemic levels of 3.5% in first half of FY23 (FY22: operating loss of 7.4%; FY20: 3.2%) led by sharp cost reductions across segments. Some of the cost reduction measures implemented by TCIL were pay-cuts, right sizing of workforce and automation and digitization of certain processes. The margins are expected to sustain at 3-3.5% over the near to medium term benefiting cash generation.

Mr. Madhavan Menon, Chairman & Managing Director, Thomas Cook (India) Limited said, “CRISIL’s revised outlook to ‘Stable’ and reaffirmed ratings are a strong reiteration of Thomas Cook India’s leadership position and Balance Sheet strength. The ratings reflect our strong brand equity in both the forex and travel businesses; equally the strong support from our majority shareholder Fairfax Financial Holdings. Our sustained momentum on our Digital First strategy and strong delivery on cost management have been pivotal to our rapid return to recovery and growth Vs our prepandemic levels. Our robust forward pipeline augurs well for a growth year 2023 – across all our lines of business.”

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