Thomas Cook (India) Ltd

During the fiscal year, our Digital First strategy witnessed sustained momentum. We reaffirmed our commitment to becoming more customer-focused and achieved operational efficiencies.

Madhavan Menon

Executive Chairman, Thomas Cook (India) Limited

The crisis of the pandemic represented both a challenge and an opportunity for your Company.

I am sure that all of you have actively tracked our journey through the pandemic and our significant recovery emerging out of the pandemic and for the FY 2022-23. I am going to take this opportunity to talk about some parts of the incredible journey that the team undertook, that brought your company back from the brink.

We saw results reflecting as early as Q2 FY23, culminating in a record performance for the year ended March 31, 2023. This transformed your Company from zero to hero!

Thomas Cook India delivered the highest operating profit in a decade: Operating EBITDA at Rs. 1.2 Bn for FY23; Operating PBT at Rs. 560 Mn Vs a loss of Rs. 1.14 Bn in FY22.

At a Group level, Operating EBITDA grew significantly to Rs. 2.7 Bn for FY23 against a loss of Rs. 1.2 Bn in FY22

The growth drivers were your Foreign Exchange & Travel Businesses (Thomas Cook); Hospitality (Sterling Holidays)

Sterling Holidays registered its highest EBITDA & PBT since inception: EBITDA at Rs 1.1 Bn for FY23; PBT at Rs. 659 Mn Vs Rs. 436 Mn in FY22

As early as June 2020, with signs that the pandemic would continue unabated, we took a difficult but crucial step to right-size the organization. This was managed with sensitivity – by careful analysis of overlapping roles/ redundancies and creating common resource pools, that reduced bench strength by approx. 30%. Additionally, your senior and mid-management took a sizable pay cut across both the India businesses & overseas subsidiaries.

After years of building infrastructure, we scaled down our physical network basis criticality & profitability, reducing outflows on lease rentals. We relocated SOTC Travel from its earlier premises to a separate floor in the Thomas Cook head office building in Mumbai, significantly reducing costs. We also terminated or paused many service agreements towards controlling cash outflows.

Your Company's overall costs saw an immediate reduction by approx. 50% starting June-July 2020, which we sustained through the two-year period of the pandemic. As we emerged from the pandemic and scaled up businesses and resultant costs, our continued focus on cost optimization delivered significant annualized savings of Rs.3.71 Bn for FY23 - a 30% reduction in costs Vs FY20 (pre-pandemic).

Re structuring the Enterprise

Travel Services: To drive economies of scale by joint contracting and bulk buying, we integrated the backend of our holiday business at Thomas Cook and SOTC Travel, creating a consolidated product-contracting operations unit. This equipped us with a unique competitive advantage - of operating combined group tours, increase profitability, with improved margins and efficiencies.

At the front end, we took a strategic decision to operate as distinct entities for marketing, sales & distribution. This created healthy competition between our brands, while simultaneously enhancing our visibility, market share and leadership.

We replicated this for our Corporate Travel units across Thomas Cook India & SOTC: integrating to form a leaner consolidated back end, while keeping individual customer-facing teams intact – ensuring better contracting and a fungible team able to serve more customers.

Foreign Exchange: We reimagined our Foreign Exchange business by setting up a central team for lead capture to sale, with a seamless handover to the closest retail outlets for last-mile delivery of #Ghar pe Forex - within 2 hours! The ease/convenience for customers, coupled with the speed and efficiencies of a consolidated team continues to give your Company a compelling advantage.

Sterling Holidays: also restructured its business model by pivoting away from its timeshare business, toward its more asset-light and profitable hotel & resort business. Accordingly, the company merged the vacation ownership team with their existing network. To capitalize on the strong and growing domestic demand, Sterling embarked on aggressive expansion, adding 184 rooms and 6 new resorts, and is set to add a resort a month for the second half of the year!

Your Company maximized on the downtime to accelerate its digital transformation. This was done to elevate customer experience and increase productivity by reducing processing time, minimizing costs and eliminating errors.

In addition to our self-booking and servicing apps, we introduced an innovative dynamic holiday bundler to help customers choose their air and land components basis their preferences.

To empower its Partner/Agent, your Company developed digital tools for its Holidays and Foreign Exchange businesses - providing seamless access to our products/ services, booking and payment systems – to help Partners serve their customers better. Over 1600 forex partners have been onboarded with the business of Rs 1000 crores generated since the launch.

For today's business traveller, your Company has deployed and enhanced corporate self-booking tools for both its Business Travel and Foreign Exchange segments - customized basis respective corporate requirements/ policies. The high adoption by over 50% of corporates highlights the success of the model.

A state-of-the-art Vendor Management System was introduced across businesses to streamline processes from procurement to settlement. For improved customer experience, our enhanced CRM integration and a common UI for sellers & customers alike – significantly simplify the user & seller experience.

"Sterling One" a self-help booking platform, for Sterling Holidays' partners and customers was launched to significantly enhance customer experience while expanding/scaling the distribution of resort inventory and room rates.

As a result of restructuring, cost optimization and digitization, your Company continues to witness significant productivity gains across each line of business.

Holidays: Digitising our processes has reduced turnaround time for a customized holiday plan and booking from around 4 days to merely 15 mins! This has resulted in strong growth in our customized holiday segment - by 55% Vs pre-pandemic volumes.

Foreign Exchange: At a turnover level, per-person productivity has seen an increase of 77% YoY; 5% Vs pre-pandemic. The retail segment saw a 97% recovery Vs pre-pandemic; card loads grew by 172% YoY and 107% recovery Vs pre-pandemic. The overseas education segment was at a robust 162% YoY; surpassing pre-pandemic levels by 38%. Your Foreign Exchange business has reiterated its leadership – standing tall as the largest non-bank forex services provider in India, and second only to HDFC from a pre-paid cards perspective.

Business Travel: has increased per person productivity by 62% and a reduction in the receivables cycle to 21 days, from approx. 35 days pre-pandemic.

MICE: Increased per-person productivity by 26%; growth by 711% YoY; recovery by 85 %Vs pre-pandemic. The business managed sizeable corporate movements - with over 600 groups between 100 -3000 delegates per group. Additionally, the team handled large inbound groups totaling over 6700 delegates from across 130 countries. Your Company was empaneled by the Government of India as Event Partner for India's prestigious G20 preparatory meetings and has managed over 37 events across 29 cities. We have also handled over 20,000 customers for the Khelo India Games 2023 and successfully managed several pioneering government initiatives like the Digital Yoga Exhibition and the groundbreaking ceremony for the world's first WHO Global Centre for Traditional Medicine.

Sterling: witnessed a 42% growth in the average room rate and a 53% growth in F&B YoY. The guest ratio increased to 62% Vs 47% (pre-pandemic). Rapid expansion with 184 rooms added in FY23 and 6 new resorts. Per-person productivity increased by a strong 59% during pre-pandemic.

Digital Imaging Solutions (DEI): FY23 saw the renewal of 34 existing and 28 new partnerships; operational launch of 8 key projects. A milestone was achieved with the launch of the Dubai Balloon Project – DEI's first B2C attraction.

Outlook/Trends and Our Strategy:

The pandemic has accelerated some major shifts in the Indian market. Let me focus on 4 of them:

Shift from Savers to Spenders: The Indian consumer has shifted from being a Saver to a Spender, and this changed mindset will continue to have a cascading impact on holidays. We are already seeing higher travel spending and frequency and have launched a portfolio of short breaks and attractive new holiday options. Our focus on the domestic cruise potential has seen your Company book over 8000 customers – achieving top-seller status with Cordelia Cruises.

Rise of Young India/Digital India: Youth power bodes well with India being the world's youngest demography with 65% of its population under 35 years. Our digital focus has resulted in a drop in our average consumer age by a significant 10 years. With this segment being passionate about travel, our specially designed Gen Z tours offer experiences like sky diving, deep sea diving; exploring local cuisine and nightlife; also, unbeatable offers including best price guarantee and No Cost EMIs.

Rise of Bharat/Regional Markets given increased disposable incomes, connectivity due to new flights/regional airports and a highly aspirational market. Your Company's network expansion into Tier 2-4 towns and regional marketing intends to capitalize on this sizeable opportunity.

Demand for Experiential Travel: The pandemic has given rise to the ‘YOLO - You Only Live Once' outlook, with an increased desire to tick off bucket-list experiences.

Our pivot to personalized programs has resulted in a 40-50% increase in our customized holidays business compared to pre-pandemic with accelerated demand for unique, shareable experiences versus only exploring popular tourist locales and regular sightseeing tours.

Bullish about the future

While all seems to be going well, there are also some challenges ahead that the teams are working to mitigate and manage.

Visa challenges for long-haul destinations like Europe and USA have created a strong opportunity for both our domestic and short-haul businesses that we have leveraged well through our portfolio of Easy Visa Holidays. We also expect that these visa challenges will ease off as more consulates shore up their capabilities and start offering simpler, online visa applications.

Elevated airfares for both domestic and international that are currently causing some pain to holiday planners should also ease off steadily as more airline capacity is added by airlines like Air India and Indigo over the next couple of years.

Acknowledgements

Before I end, I would like to take this opportunity to place on record my sincere gratitude to all those who have supported our eventful journey back from the brink:

Firstly, to all our employees & their families – thank you for your hard work & for your incredible support right through.

To our Board of Directors - each of you has been pillar of support and guidance throughout this journey. Thank you.

Finally to our promoter Fairfax Financial Holdings & its leadership team – a big thank you for standing with us & demonstrating your belief & trust through these most difficult times.

Thank you,