CRIISL reaffirms Thomas Cook India Limited ratings

CRISIL Ratings has reaffirmed its ratings on the bank facilities, debt programs and corporate credit rating of Thomas Cook India Limited (TCIL) to ‘CRISIL A + / CCR A + / Negative / CRISIL A1’.

The reaffirmation reflects the strong parent support of Fairfax Financial Holdings Ltd (Fairfax, rated by S&P as “BBB- / Positive”), healthy liquidity in the form of cash and cash equivalents against limited external debt supporting the structure of the capital. The ratings also take into account the dominant position of the Thomas Cook India Group in the foreign exchange market and the strong brand value in travel-related services.

The group’s foreign exchange (forex) and travel activities were significantly affected by the covid-19 pandemic during fiscal year 2021, with TCIL reporting consolidated revenue of Rs 946 crore during the fiscal year 2021, or about 85% less than the previous year. This resulted in TCIL’s consolidated EBITDA loss (earnings before interest, taxes, depreciation and amortization) of over Rs 250 crore in fiscal year 2021 against EBITDA of Rs 222 crore in fiscal year 2020.

However, the business has experienced a sequential recovery in the last nine months of fiscal 2021, which combined with continued cost reduction measures (total cost savings of over Rs 650 crore during fiscal year 2021), resulted in a sequential reduction in operating losses. In addition, as expected, TCIL received a large cash injection from its ultimate parent company, Fairfax – Rs 436 crore of optionally convertible cumulative redeemable preference shares (OCCRPS), in March 2021. needed support for TCIL’s liquidity.

TCIL’s limited external debt and sound liquidity in the form of cash and cash equivalents translates into a comfortable cash-to-total external debt ratio of approximately 2 times as of March 31, 2021 (2.3 times as of March 31, 2020) .

That said, the industry is currently hit by an intense second wave of the pandemic starting in April of this year. The first quarter of the current fiscal year, which is typically peak season for the national summer vacation, is expected to be very low given state-level bottlenecks. However, states are witnessing a relaxation of travel restrictions as the impact of the second wave wears off. Additionally, driven by strong pent-up demand and an expected improvement in immunization rates, domestic travel is expected to pick up from the second quarter of fiscal 2022 and will be the main driver of the recovery in the travel segment. The company is also looking to realign its strategy to focus more on the domestic market. However, segments such as international vacations and inbound travel, which historically have made up the bulk of TCIL’s travel business, may not experience a significant recovery until Q3 with an expected easing of restrictions in countries. foreigners. The expected improvement in international travel and increased economic activity will also support the resumption of TCIL’s foreign exchange business. The pace of the recovery in the travel and forex sector will remain a key area to watch.

Overall, while Fiscal 2022 would still be significantly below FY 2020 levels, TCIL’s business is expected to experience a significant improvement over the previous fiscal year. This, together with continued cost control (cost savings of over Rs 650 crore in fiscal year 2021) should result in a significant improvement in operating profitability over the previous fiscal year, with an expectation of ” positive EBITDA in the second half of the year. However, a slower-than-expected ramp-up or reduced cost savings, leading to operating losses for the current year, could lead to a rating downgrade and will therefore be a key factor in rating sensitivity. .

In addition, TCIL’s ratings take into account the expectation of continued strong support from the parent company and will remain a key factor in rating sensitivity. The strengths of the rating are partially offset by susceptibility to geopolitical risks and intense competition in the travel and tourism industry. In addition, the group also faces risks related to its inorganic growth strategy.

The “negative” outlook continues to reflect the risk of a slower-than-expected recovery in the travel and forex sector due to a prolonged pandemic.

CRISIL Ratings also withdrew its rating on the proposed long-term bank facility of Rs 306 crore after receiving confirmation from the company as it was unused. Ratings are withdrawn in accordance with CRISIL Ratings rating withdrawal policy.

Shares of THOMAS COOK (INDIA) LTD. was last trading on BSE at Rs.62.25 from the previous close of Rs. 64.45. The total number of shares traded during the day was 118,302 in more than 1,302 trades.

The stock hit an intraday high of Rs. 64.7 and an intraday low of 61.25. The net turnover during the day was Rs. 7,326,027.


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