The Hindu Business Line : Despite tsunami, Thomas Cook bullish on growth

THOMAS Cook (India) Ltd, which posted a 27 per cent increase in net profit for the year ended October 31, 2004, expects to keep up the growth momentum in the current year as well, supported by all segments of its business.

The Executive Director, Finance, Mr Robin Banerjee, is optimistic about the company's future business prospects. He details the company's plans for the year in an interview with Business Line. Excerpts:

Do you think the tsunami will have a major impact on business for Thomas Cook India and for the country as a whole?

At this time, it is too early to conjecture as to what the implications for the company will be. That is because our primary business comes from inbound passengers to Goa. Our outbound passengers are headed for Europe and the US, which have not been affected. Prima facie it does not look as though our business will be affected.

For the country as a whole, travel, especially to destinations such as Kerala may be affected. There is a general implication of this devastation; people may not travel till the next full moon day as a churning of the sea is expected during this period.

Fortunately for India, the affected areas are not really the major tourist centres.

But what about the travel advisories issued by the UK and the US?

While a number of countries were hit by the tsunami, five bore the brunt. And, though the advisories have been issued against countries as a whole, one should consider that India is a large country and the devastation is limited to the eastern coast. Besides, the warnings were issued based on first impressions.

Also, for people who are keen to go through with their travel plans, there are several places of tourist interest in the North, such as Jaipur, Udaipur, and Agra. As it stands, there has not been a big impact on Thomas Cook India. However, it is still too early to come to a conclusion on the full impact on tourism.

What were the factors that steered topline and bottomline growth in the year ended October 31, 2004 (Rs 124 crore, against Rs 105 crore)? What are the factors that will propel growth in future?

Well, all our businesses are in travel-related segments. As you know, we are active in a number of areas; travel, tourism, insurance, etc. All these sectors have been growing aggressively. The reasons for this growth are the general buoyancy in the market, people are travelling, there is optimism in the air, and India has become a preferred destination, despite the inadequate infrastructure, be it airports, roads, hotels, etc. India still represents value-for-money tourism, and therefore, our businesses have been doing well and we as a company have also been providing better services. So, the growth shown by all the segments that we are active in has propelled topline growth. We are optimistic for the future as well.

As for the sectors that are expected to propel growth...well, we expect all travel-related businesses to do well. We are involved in a host of travel and travel-related businesses, be it arranging conferences, tours, hotel bookings, cars, travel insurance, forex, cash, cards. So, if the travel industry continues to grow, we believe that we will do to.

We have a growth strategy for each of our business segments. We believe that we possess both expertise and critical mass to grow each of these segments.

Would you look to add to your portfolio of products?

Yes, we are always looking for avenues for growth - and we will take them as and when they present themselves. If we believe that we can add value for our customers by entering a particular sector, we would be willing to enter it.

Other income has doubled over the year to Rs 6.67 crore. What were the reasons behind this growth?

Other income has doubled mainly on account of the sale of shares that we held in a US-based Internet travel company. We made Rs 2.4 crore in the sale that was concluded in August. The main reason for selling the shares was that we did not believe that they were adding any value to our shareholders.

Besides, the owners of the Internet company were keen to sell out to a third party.

Thomas Cook India raised its advertising expenditure to Rs 8.36 crore (Rs 6.93 crore) in the year ended October 31, 2004. Was the increase part of a conscious decision to gain a larger presence?

As an organisation we are conscious of the need to build our brand and we will do everything to build it. Over the years, TCIL has worked to enhance its visibility, and this requires money. We will continue to promote ourselves to achieve top-of-the-mind recall with our customers.

Interest has dropped to Rs 59.5 lakh (Rs 1.04 crore) in the previous financial year. Does this follow a change in the company's debt position? What is your outstanding debt, if any?

We are a cash-surplus company, so our borrowings are coming down. For seven-eight months of the year, we are cash-surplus, and in the second-half of the year, we are cash-deficit. This is because when the tourist season begins, we need cash to do business.

Generally speaking, interest should continue to come down as we make profits and plough funds into the business.

As for our outstanding debt, well, we may show debt for one or two days. This is basically floating debt. There is no borrowing from the market. The reason why our accounts show this temporary debt is because we export currency. When we export, a credit takes place in our books for one or two days. During this period, there is a negative in our accounts. This temporary overdraft happens only when dollars are sent out.

Have you any plans for capital expenditure?

We have just completed a major computerisation drive. For now, there are no specific plans for any further investments. We are not a capital expenditure-oriented company. Our main business is in brand building, human resources - basically softer issues. So, there are no major plans, except that we have to stabilise the new system.

The custom-built software is written by TCS. With this software system, we will be able to service all our customers' needs at a single point, as a one-stop shop.

We may incur some stabilisation expenses on the system, which has been implemented in two stages; in the foreign exchange department in April, and in the travel and leisure segment in October.

We may also incur some capital expenditure on expanding our network of branches. The branches will be opened in cities that we believe will deliver the largest business. Of course, this also depends on availability of space. We want to locate on a high street since visibility and accessibility are key for our business.

How will you deploy the accretion to reserves (Rs 128.13 crore, against Rs 106.85 crore)? Will this be ploughed back into the business, or will you be rewarding shareholders with these reserves?

Any company has two options to deploy its profit after tax — one, is to declare a dividend. Two, the funds could be retained in the business. The third option is to issue bonus shares.

We have maintained a dividend of 37.5 per cent this year as well. The remaining is being ploughed back into the business, which has led to the increase in reserves.

Revenue from financial services dipped to Rs 6.23 crore (Rs 7.36 crore) in the fourth quarter. What would you attribute the fall to?

The revenue from financial services has gone up by 10 per cent for the full year. The drop in revenues in Q4 could be attributed to a quarter-to-quarter correction, as financial services is a function of how many dollars gets added.

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