by Vijaylakshmi
CRISIL Ratings has upgraded its outlook on the bank loan facilities and corporate credit rating (CCR) of Thomas Cook India Limited (TCIL) to ‘Positive’ from ‘Stable’ while reaffirming the ratings at ‘CRISIL AA-/Positive CRISIL A1+’.
The upgraded outlook and reaffirmed rating of the long term at ‘AA-/Positive’ and short term at ‘CRISIL A1+’ follows the rating upgrade on the loan facilities of its parent, Fairfax by S&P Global Ratings to BBB+/Positive from BBB+/Watch Positive. TCIL’s rating benefits from strong support from Fairfax. The rating also factors in significant improvement in the Thomas Cook India group’s overall operating performance, driven by strong growth in revenues – expected to sustain over the medium term and structural reduction in cost leading to better operating margin and ROCE. The Company’s financial risk profile has also improved following sustained better operating performance, reflected in its adequate capital structure and strong liquid surpluses.
The Thomas Cook India Group witnessed significant scale-up of operations by ~44 percent driven by sustained strong growth across all segments – travel, forex, Leisure & hospitality and digi-photo services. Overall, revenue for the group is estimated to continue growing at double digits over medium term.
Operating margins improved to 6.0 percent in fiscal 2024 vs 5.3 percent in fiscal 2023 led by cost reduction initiatives across segments including right sizing of branch network and automation/ digitisation of certain processes and benefits of operating leverage accruing. The margins are expected to sustain at similar levels over the medium term as the benefits from these structural cost saving measures will continue.
Financial risk profile (on a consolidated basis) is expected to remain comfortable with healthy debt metrics. The Thomas Cook India Group’s liquidity has also improved; cash & cash equivalents of INR 1518 cr. as on March 31, 2024 (INR 1009 crore as on March 31, 2023) Net cash accrual along with cash & cash equivalents would be adequate to meet capital expenditure (capex) requirements of INR 100-120 crore per annum and repayment obligations of INR 46 crore in fiscal 2025 and INR 26 crore in fiscal 2026.
