You are here: Home » Companies » News
Business Standard

Covid-19 impact: CRISIL downgrades Thomas Cook India's rating to A+

The ratings are a result of the pandemic weakening the company's business and financial risk profiles

Topics
Crisil | Thomas Cook | Thomas Cook (India)

Abhijit Lele  |  Mumbai 

Thomas Cook
The continued travel restrictions and negative customer sentiments have severely impacted leisure and corporate travel.

Rating agency has downgraded India Ltd’s (TCIL) bank facilities from “AA-” to “A+” on the weakening of the company’s business and financial risk profiles due to Covid-19 pandemic.

The continued travel restrictions and negative customer sentiments have severely impacted leisure and corporate travel, and the foreign exchange (forex) business. This may lead to operating losses during fiscal 2021 and substantially reduce the net free cash (over Rs 200 crore reported as on March 31, 2020), said in a statement. TCIL is part of Prem Watsa controlled Fairfax Financial Holdings Ltd (Fairfax) group.

During the first quarter (June 2020) of the fiscal, TCIL reported EBITDA (earnings before interest, tax, depreciation, and amortisation) loss of Rs 80 crore. It also reported reduction in cash & cash equivalents of around Rs 240 crore due to the lockdown.

While economies are gradually opening up since the last quarter, domestic remains significantly lower than pre-pandemic levels and international travel is yet to resume.

TCIL is undertaking several cash preservation measures including optimisation of payroll cost, reduction in marketing and overhead costs, renegotiation of lease rentals and supplier contracts. These steps are expected to result in savings of more than Rs 550 crore during the fiscal.

Additionally, recent withdrawal of the share buyback offer will further reduce cash outflow by around Rs 180 crore (including tax on share buyback). Further, the company is looking to reengineer the business, focusing on aspects such as contactless customer experience, increased digitisation and process efficiencies, rating agency added.

The forex business, classified as an essential service, resumed operations since mid-April 2020. The gross volume in forex business has been lower than pre-pandemic levels. But, it has picked up on a month-on-month basis and the business has turned cash positive since June 2020. The continued ramp-up in both the travel and forex volume remains a key monitorable.

TCIL's rating factor in expectation of strong support from Fairfax Financial Holdings during the current fiscal, towards revival of business and strengthening of liquidity and financial profile.

Dear Reader,


Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

First Published: Wed, October 14 2020. 12:21 IST
RECOMMENDED FOR YOU
.