Peter Kerkar, Director, Cox & Kings, is satisfied with the company’s results for the first quarter, which is a crucial one for the travel industry when maximum outbound travel takes place. Growing at almost double the market rate at 15 per cent, Cox & Kings has also managed to reduce its debt levels by selling part of its stake in cash burning businesses like LateRoom and Holiday Break recently. In a chat with Businessline , Kerkar, the owner of the largest outbound travel package company in India, shared his views on the travel industry and what lies ahead for his company. Excerpts:

Where does Cox & Kings stand today in the travel market and what are the trends witnessed by the industry?

It is a moment of consolidation in India. Previously there were three organised players but now there are only two. It gives us an opportunity to take advantage of the fragmented market and while we grew at 15 per cent, our closest competitor grew at 6 per cent while some online players had a 26-per cent decline in packages. Visas issued to go overseas have grown at 7 per cent year on year. It may have been a bad year for specific hotel companies but not for travel. Our business driver is about Indians going overseas. We wanted to grow at double the market rate which is what we have done this year. The outbound travel market is about 4 million and we see it doubling to 8 million next year and we are bullish about the segment.

Are you satisfied with EBITA margins at around 11-12 per cent?

Our EBITA margins have been good for the past 4-5 years. If at all the margins are sacrificed, we will compensate that by growth which will come from outbound packages which we expect to grow at 15-20 per cent for the next three years. Only 1 per cent of the total Indian population goes overseas, we are still at the bottom of the hockey curve.

How come all your acquisitions have been in the overseas markets. Why have you not considered any buys in the domestic market like some of your competitors like Thomas Cook?

If you are the biggest then who do you buy. We would rather compete in the market and build our brand and take market share. The time for acquisitions in India was probably 5-6 years ago. We did look at Thomas Cook when it was up for sale but could not afford it as we had debt on our balance sheet from the acquisition of Holiday Break. I have done 15 acquisitions over the past 10 years and know how difficult it is to integrate companies. We chose on growing our business organically in India.

Are you threatened by the start-ups and online travel companies?

The online players do not make money, while I am in the business of making money. The rate of failure of start-ups is high and I do not see any value in them. There is nothing that they can do that we cannot do. There is no destination or type of travel that we do not cover. The Indian market is ready for technology but there is no travel company which can do complex dynamic packaging through the net. If any start-up can demonstrate that capability then we may consider it.

What about your own online properties like Ezeego and Cox & Kings.com?

Ezeego is an independently managed company in which Cox & Kings has a 15 per cent stake. About 4-5 per cent of bookings come through the net. People should use the online sites for price comparisons to understand about the product but ultimately the safety and expertise lies with the offline companies.

Apart from leisure travel, Cox & Kings is also in the business of education under PGL and hybrid hotels with Meininger. When will these businesses and brands get launched in India?

In India, real estate rates and yields are quite high. Our current expansion for both these businesses is focussed in Europe but if we were to bring them to India, we would have to acquire land for the education business which is under the PGL brand where we train children in the 8-13 age group in areas such as leadership and team-building which are all about out-of-school experiences. Today, we would be happy to do a leased model since we do not have access to a land bank and have spoken to more than 3,000 IB and international schools. As for Meininger, the concept will work in India but it will be a learning experience. But it is all about the yield, so if we can find an appropriate owner who is happy with the yields that we can generate, then we would be happy to bring Meininger. We do not want to put our capital into owning assets in the hotel space as the cost of land is already high in India.

How comfortable is Cox & Kings with its debt position today?

In 2011, our gross debt was ₹5,300 crore and today it is at ₹3,500 crore. Out net debt is a shade under ₹2,000 crore. We collect cash from our clients in advance and out EBITA is around ₹900 crore. The debt to EBITA ratio is comfortable.

Considering you sold off products like Late Rooms and Super Break to reduce your debt, has the disinvestment strategy worked for Cox & Kings?

We had debt on our balance sheet since B2C businesses burn cash. I found a private equity who had interest in these businesses and so we sold it to them and made money on it. And now these businesses are running independently and getting funding from their balance sheet while we still have 49 per cent in these businesses.

Has your business been impacted in Europe with Brexit and the terror attacks?

We have seen the first wave of the impact. Brexit was not as traumatic compared to terrorism. Business was far worse affected in Brussels as it was closed for 4-5 weeks. There were almost 140 school group cancellations since they did not want to travel to France and that hurt us more than anything else.

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