Thomas Cook India Receives Upgraded Credit Outlook from CRISIL

Thomas Cook India Limited (TCIL) announced positive news today regarding its credit ratings. CRISIL Ratings, a leading Indian credit rating agency, upgraded its outlook on the company’s bank loan facilities and corporate credit rating to ‘Positive’ from ‘Stable’ while reaffirming the long-term rating at ‘CRISIL AA-’ and the short-term rating at ‘CRISIL A1+’.

Factors Behind Revision of Rating

This improved outlook is attributed to several key drivers:

• Strong Parentage Support: S&P Global Ratings’ recent upgrade of TCIL’s parent company, Fairfax Financial Holdings, to ‘BBB+/Positive’ from ‘BBB+/Watch Positive’ has a positive impact on TCIL’s creditworthiness.
• Operational Excellence: TCIL has demonstrated significant improvement in its overall operating performance. Revenue growth has been robust across all business segments, and this momentum is expected to continue in the medium term.
• Cost Optimisation: The company has implemented successful cost-reduction initiatives, including network optimisation and process digitisation. These measures have led to improved operating margins and Return on Capital Employed (ROCE).
• Healthy Financials: TCIL’s financial risk profile has strengthened due to sustained profitability and a well-managed capital structure. The company boasts strong liquidity with ample cash reserves to meet upcoming obligations.

Growth and Efficiency

The Thomas Cook India Group, which includes TCIL and its subsidiaries, has witnessed a significant 44% expansion in operations. This growth is fueled by strong performance across all segments, encompassing travel services, foreign exchange, leisure & hospitality, and digital photo services. TCIL expects its group revenue to maintain a double-digit growth trajectory in the medium term.

Improved Margins and Liquidity

Operating margins have also seen a positive uptick, reaching 6.0% in fiscal 2024 compared to 5.3% in fiscal 2023. This improvement is attributed to the aforementioned cost-saving measures. These structural changes are expected to maintain margins at similar levels in the coming years.

The Thomas Cook India Group’s liquidity position has also strengthened, with cash and cash equivalents reaching ₹1,518 crore as of March 31, 2024, compared to ₹1,009 crore on March 31, 2023. This strong liquidity and ongoing cash generation will comfortably meet the group’s capital expenditure needs and upcoming debt repayments.

“CRISIL’s upgraded rating outlook and reaffirmed ratings at ‘CRISIL AA-/CRISIL A1+’ is a strong reiteration of the Thomas Cook India Group’s leadership strength across its business segments of Travel, Forex, Holidays, Hospitality and Digital Imaging services. These factors in both the Group’s continued focus on cost management and its accelerated digital-first delivery are expected to drive momentum in the medium term,” said Mr Madhavan Menon, Executive Chairman, Thomas Cook (India) Limited.

He further added, “The TCIL Group reported its highest-ever profits in FY24, with every business and geography contributing to the profitability. Given the unabated growth in travel and demand for travel-related services, we see a strong season and year ahead.’’

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.