Leisure travel company Cox & Kings will rope in an investor to raise about Rs 750 crore in its UK travel business. The move comes in the wake of rising debt and loss at the consolidated level.
On Wednesday, the company informed the Bombay Stock Exchange that its board had approved a $140-million (about Rs 750-crore) investment by an institutional investor in Promethean Holdings (UK) Limited, a wholly owned overseas subsidiary.
Last July, Cox & Kings acquired UK-based tour operator Holidaybreak for Rs 2,300 crore. The acquisition was carried out by Promethean Holdings, which now owns 100 per cent in Holidaybreak.
Cox & Kings had raised equivalent of Rs 1,400 crore in dollar debt to finance the deal — and its interest costs have gone up sharply 700 times after the takeover. On a consolidated basis, Cox & Kings reported a loss of Rs 26 crore in the quarter ended March, against a profit of Rs 46 crore in the same period last year.
Holidaybreak specialises in camping, adventure tours and student tourism.
Cox & Kings director Peter Kerkar said the company, founded in 1758, was not divesting its stake in Promethean Holdings. “The investment would come as fresh infusion of funds into Promethean Holdings,” he noted.
Cox & Kings is “finalising the definitive agreements” with the institutional investor. “Until this is completed, we are bound by a confidentiality agreement with the investor, and hence, not able to share further info on the deal. This investment will improve the consolidated debt to equity position of the Group,” Kerkar added.
Cox & Kings has started consolidating Holidaybreak’s financials since last September. “The loss at consolidated level is due to the loss at Holidaybreak, which has a huge seasonality in its business,” he noted. The six months from September (to March) were a “weak season” for these businesses, and Holidaybreak had historically recorded a loss in this period, he added.
According to travel industry sources, the UK tour operators are facing a difficult period because of a drop in the gross domestic product and decline in forward bookings for summer. May-October is a good season for UK operators — and outbound bookings on industry-wide basis are said to be lower in 2012.
“We are happy with the order book for the next six months (April-September),” Kerkar said. “It is the strong period for this business.”