Interview with Director, Cox & Kings
While leisure travel currently accounts for the bulk of Cox & Kings’ business, the company is targeting education travel in the next two to three years, Director Peter Kerkar tells Ruchika Chitravanshi in a telephonic interview. Edited excerpts:
What does the deal with Citi Venture Capital International mean for the India business?
I had planed to transform the company from one primarily into tour operations to an education specialist. We knew we were acquiring debt for Holidaybreak. We brought in $137.75 million, which changed our debt-to-equity ratio from 2.7 to 2.2 within a year of the acquisition. I am not diluting my shareholders at Cox & Kings. From the start, I said we would have a very aggressive debt-reduction programme. This is its first stage.
What is the next stage?
We would create a cash pool from business flows. This would further write-off our debt. Between Cox & Kings and its UK subsidiary Prometheon Holdings, our earnings before interest, tax, depreciation and amortisation (Ebitda) is Rs 700 crore. Our payments don’t start before 18 months. It allows me to take the cash from Holidaybreak into the cash pool to reduce debt. After this deal, net debt would fall from $700 million to about $540 million.
What would be the key growth driver for the company?
Primarily, it would be educational travel. This has become a significant part of the business. We also have a camping division. We have forayed into this specialised market, which we believe is recession-proof and has great roll-out potential in Europe, followed by Asia.
What is the contribution of these verticals to your overall revenue?
For 2011-12, the share of leisure was 52 per cent, education 20 per cent and the remaining was accounted for by camping. In the next two to three years, 60 per cent of our revenue would be accounted for by the education business. In the last quarter, education accounted for half our Ebitda.
What are the Holidaybreak products you want to bring to India?
There are two kinds of products---up-centres, which we run for children (learning and activity centres), and our programmes for students like psychology, history and language tours. PGL, a Holidaybreak brand, has years of experience in health and safety. We will bring the standards and discipline of the UK into India.
Would you create a separate brand entity for Holidaybreak products or would these be merged with Cox & Kings?
It is slightly early to say, as we would have to see what brands we want to bring. Holidaybreak has 20 brands that are market leaders in Europe. We will see what fits here.
How much of the company’s revenue does India account for? What are the growth prospects here?
It is a little over 22 per cent and we are seeing growth of about 30 per cent on a year-on-year basis. The base we are starting from is so small that the double-digit growth will continue even in this economy. People will trade down, but won’t stop travelling. They will take smaller, but three to four holidays a year.
What kind of consolidation do you expect in the travel market?
There is a natural fall-out in the market; the bigger boys, who are better capitalised and have franchise and distribution networks in the international arena, would win. Regional players would come under pressure. Smaller agents who have cash flow from ticketing are already under pressure. These structural changes would benefit most big players. While the market may see a slowdown, in terms of organised players, there should be serious growth.
What do you think of the online market?
We look at the online space as just another way of accessing our customer base. We feel we have a world class online platform, comparable with any online travel agency abroad. We have always said distribution was about touching and feeling people in India, at least for the next ten years. Franchisees enable us to have that touch-and-feel effect, and that has been our expansion strategy. We have to be ready with the online platform, when the movement comes to India. Technologically, we are prepared. But we are not looking at any acquisitions in the space.
With Thomas Cook’s new avatar, how do you see competition evolving?
I have been cognizant of competitors because you cannot be complacent. But beyond that, we are the market leader.
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