Just when the buzz was getting stronger about travel company Cox & Kings emerging as a hot favourite to buy out the India business of Thomas Cook, the company has distanced itself from the deal. Its chief financial officer, Anil Khandelwal, told Business Standard, “We are not interested in Thomas Cook (India).” Company sources said buying Thomas Cook, better known for its forex business than travel, would not help Cox & Kings.
Thomas Cook, which had announced the sell-off of its non-core assets last year to reduce debt, said earlier this month it was in the process of inviting formal bids for its 77.1 per cent shareholding in the India business. Thomas Cook India is a profitable and high-growth centre of the debt-ridden UK-based travel conglomerate. Private equity funds Actis, KKR and Carlyle and some strategic players like Travelex and Japan Tourist Bureau are expected to bid for Thomas Cook India.
While a senior executive at Thomas Cook India said it would take several months before the deal was finalised, the market is talking about the buy getting finalised by May.
Sources involved in the negotiations have said Cox & Kings’ lenders have also advised it to stay away from the deal. The company closed the acquisition of Holidaybreak for £312 million late last year and its balance sheet is stretched. Its debt to earnings before interest, taxes, depreciation and amortization (Ebitda) is 11 times, based on its consolidated debt of Rs 3,409 crore as in September and nine-month annualised profit before interest and taxes of Rs 310 crore. The company slipped into red in the third quarter. Therefore, at current valuations, the company is not keen to explore the Thomas Cook India buy. But sources said it would revisit the deal, if the price came down.
Many also believe the company is yet to fully integrate Holidaybreak’s operations with itself and, therefore, it is better to stay away from another large deal at this juncture. After the acquisition of Holidaybreak, revenue has shot up by 160 per cent annually. On a commission level, Holidaybreak clocked Rs 152 crore in revenue, but posted a net loss of Rs 53 crore in the December quarter, leading to an overall loss of Rs 7.5 crore for Cox & Kings.
According to sources in the banking industry, even Thomas Cook’s management has been sceptical about the financial bandwidth of Cox & Kings at this point and has sought letters from banks that show their support if the company goes ahead.
Explaining the Rs 7.5-crore loss, Khandelwal said Holidaybreak, which operated out of Europe, had losses in the October-March period due to off-season. For the third quarter, India contributed 21 per cent to the group’s total revenue. For the full year, it would be 18 per cent. On a standalone basis, revenue grew by 23 per cent and Ebitda rose 22 per cent.
