A new industry named ‘Attraction Industry’ is rising today: Brijesh Modi, Thomas Cook India
Brijesh Modi, CFO, Thomas Cook India Limited, speaks about travel and tourism industry, plan behind the acquisition of Digiphoto entertainment Imaging, order book and margins during an interview with Zee Business.
Brijesh Modi, CFO, Thomas Cook India Limited, speaks about travel and tourism industry, plan behind the acquisition of Digiphoto entertainment Imaging, order book and margins during an interview with Swati Khandelwal, Zee Business. Edited Excerpts:
Q: What is the rationale behind the acquisition of 51% stakes of Digiphoto Entertainment Imaging? Also, talk about the kind of advantage that it will add to your books and the time from which it will start adding to your numbers?
A: See, a new industry named ‘Attraction Industry’ is on a rise today. And, it is happening at a time when the trend of taking selfies, clicking pictures and uploading them on social media is going high especially in the travel and tourism industry. This company, Digiphoto Entertainment, is basically functional in the segment. It clicks pictures of the candid moments of people and sells them to people. For instance, if you are at a theme/entertainment park and what to have candid pictures of the moments while taking the rides then the company can assist you in doing so. Actually, Digiphoto’s, cameras are installed on the rides that capture the candid moments, which are sold to you. Thus, these pictures are a souvenir for you.
As per data statistics, 5.3 crore pictures are uploaded on Trip Advisor. This means that the trend of taking pictures is on a rise. The segment seemed quite attractive to us and is also connected to the travel and tourism sector. Therefore, we have acquired 51% stakes in the company.
On having a look on its performance in 2018, you will find that it reported revenue of around $66 million or Rs470 crores and its Profit After Tax (PAT) stood at $4.2 million or almost Rs30 crore. The company also generates free cash of around $5.3 million or Rs37 crore. Thus, it has been an accretive acquisition since day 1 and the transaction will be completed by end of March 2019. Its performance will be consolidated into our books from April 1, 2019.
Besides, travel and tourism season, outbound and domestic, will also start from April onwards and we have plans of bundling the facility along with the packages that are offered by us.
Q: Do you have acquisition plans in FY20, if yes, let us know the spots or areas that have been identified for the purpose?
A: First, we will like to digest this acquisition and get the synergy benefits at the earliest. We don’t have anything on our agenda, at present. But, we have an important point related to the adjacent/connected sector and last year, we brought the stakes of a company that curates itinerary. So, we are focusing a lot on travel technology and our last two acquisitions were in the same direction.
But, we have an important point for the adjacent/connected sector and last year, we brought stakes of Ithaka, a company that curates itinerary. So, we are focusing a lot on travel technology and our last two acquisitions were in the same direction.
Q: How much is the total order book as of now?
A: The order book looks to be a good one as our forward bookings are showing a growth of 20% in all segments from Europe to the US to domestic destinations. This means, people are travelling, and this is visible in our forward bookings. There was a time when it, travelling, was considered as a luxury but today it has turned up to be a necessity.
Q: Definitely, people are travelling a lot, but this growth is also giving birth to new companies, i.e. there is an increase in competition. How well you are positioned to face the competition, in terms of prices and margins, vis-à-vis the peers?
A: Yes, there is a competition, but the online tour facilities provide just components while we offer packages. We have a speciality like complex itinerary and new destinations. Customer satisfaction and customer service is an important aspect of our business. In addition, we imbibe technology in our day-to-day operation like real-time updates related to VISA status as well as the status of seats are provided to our customers. Thus, technology and customer experience are our USP and we are working a lot on it.
Q: What is your view on margins? Do you think that you will be able to maintain the healthy margins or there will be pressure on margins in the recent future?
A: See, in the last two years, we have acquired a lot of companies. For instance, we acquired several companies in the US, Africa, Middle East and the Far East in 2017 and all of them are destination management companies and are involved in managing the hotels of different destinations and other components. That’s why we have an advantage because we are involved in vertical integration and have been acquiring the suppliers who are involved in our supply chain.
Q: Let us know about the levels of your margins?
A: The margins, in the holiday business, usually reside in the range of 10-12%. However, it varies from destination to destination. Margins are low in air tickets and foreign exchange, which is a volume game.
Q: Will you continue with the margins or it will supersede the present levels?
A: We are continuously working on synergy benefits and identifying the processes to improve day-by-day buying with the help of acquired companies. Besides, the acquisition of SOTC in 2016 indicates that our purchasing power is quite big, and the suppliers are aware of the fact. Thus, we are reaping the benefits of this scale.
Q: What is your view on domestic travel? Can you see a trend where people prefer to opt for international destinations like Dubai or the Far East instead of the domestic ones?
A: It is not so. Our statistics suggest that there are two trends and they are the international tour and domestic tour. So, cannibalisation is not happening in the market and we can see good forward booking for domestic tours also. Of course, few people will opt for Kashmir as a destination at present, but we are encouraging our sectors like Andaman and Kerala.
Q: Did the ongoing tensions have led to a cancellation of the forward bookings for the reason, if yes, then how you will manage them?
A: We haven’t seen a huge cancellation till date as there was a trend in which people were not preferring Kashmir as a destination, but we have an endeavour to divert people to other destinations like Andaman, Kerala and Gujarat among others.
Q: Coming on your forex business. Let us know about the margin pressures and strategy to prevent it?
A: We have two units and they are wholesale and retail and when it comes to Forex then we have a focus on retail as they offer better margins. We have our own Borderless Prepaid Multicurrency Card in retail and we are encouraging it. In addition, when we sell our foreign exchange to corporates than we try to sell these Borderless Prepaid Multicurrency Card to its maximum. So, our strategy is to focus on retail through the cards and let the wholesale business comes as it arrives.
Q: Government has a special focus on hospitality, tour and travels and it is trying to encourage connections between tier-II and tier-III cities through the UDAAN Scheme. Do you see any opportunity in it? Also, talk about the targets – in revenue terms (both top line and bottom line) - that you will have as a company in next two-years, i.e. by the start of FY21?
A: See, these are the starting days for UDAAN and several airports have become operational under it. I think that it will increase the tourism flow from these small cities in the next two years and its benefits will be visible from FY21. We are expecting that these small cities, where the connectivity is available, will have a contribution of 10% in our revenue and sales.
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Q: Any expectation of a leap jump that the travel & tourism industry can see in next two-years?
A: Certainly, the industry is a reporting a year-on-year growth of 15-18% and I feel that the industry is like the fast-moving consumer industry because people like to travel on an annual basis from international to domestic levels. So, we are seeing ample opportunities in the sector. Besides, the government has been focusing on this industry may it be outbound or inbound or at the domestic level.
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