Block sale for Thomas Cook India

No piecemenal or distress sale quarterly results show Rs 5-crore profit

Thomas Cook's group stake in its India unit will not be sold on a piecemeal basis, said its managing director Madhavan Menon. He hinted the company was open to private equity (PE) investors and added the group would not do a distress sale.

Last week the group formally announced its intention to sell 77 per cent stake in Thomas Cook India. The offer has drawn interest from rival travel companies, forex majors like Travelex and PE firms.

“I don't think we have any preference at this point,'' Menon said to a query on potential suitors. “Thomas Cook India will not be broken up and sold. It will be sold in one piece.”

 

According to a sector expert, selling the foreign exchange or travel business separately would not benefit the UK-based promoters. "If the foreign exchange business in India is sold, the earnings will go to Thomas Cook India, which in turn will pay dividend to its parent. There are tax implications.'' Alternatively, for the split sale to happen, the holding structure in Thomas Cook India would have to be changed, with separate companies controlling the travel and forex business.

Menon refused to divulge the valuation expected by the promoters but said the company was not going to do a distress sale of its stake in India. "This (Thomas Cook India) is a business which is doing well. Unless the parent sees value, it is not going to sell stake,'' he said.

Thomas Cook India posted a Rs 5 crore profit in its quarterly results, declared on Thursday. Its stock closed at Rs 62.30 up 0.6 per cent. The price has been climbing up since the company announced its sale plans. Yet, it is still far off from the price at which the group repurchased the stake in India from Dubai Financial Group. In 2006, the group had sold its 55 per cent stake at Rs 46 per share and bought it two years later at Rs 107 per share from the Dubai company. Menon, however, said it would be unfair to compare that deal with the current stake offer, adding the stock market levels and economic environment are different.

Like the previous deal, the brand will also be offered to bidders for a seven-year period, he said. “Leisure and MICE (Meetings, Incentives, Conventions and Exhibitions) are drivers of our profitability. It will be of interest to anyone who buys to keep both the travel and forex business together. There are synergies and keeping them together has given value,'' he said.

According to an expert, selling the foreign exchange or travel business separately will not benefit the promoters. "If the foreign exchange business is sold, the earnings will go to Thomas Cook India, which in turn will pay dividend to its parent. There are tax implications.'' Alternatively, the holding structure in Thomas Cook India would have to be changed, with separate companies controlling the travel and forex business.

“Despite the challenging environment, Thomas Cook India has delivered impressive results, with robust revenue growth of 20 per cent and net profit growth of 19 per cent for the financial year. Both our key businesses of leisure outbound and foreign exchange have performed exceptionally well and we continue to see strong growth in our forward bookings for the upcoming holiday season,” said the company.