Cox & Kings crisis to affect travel sector badly: Thomas Cook


The crisis facing travel company Cox & Kings will have a deep, negative impact on the travel industry, especially on smaller players, said the chairman of its rival Thomas Cook India.

“I want to emphasise that the recent events surrounding a competitor has not helped any of us. It has raised more questions about our industry and I hope the end outcome is good,” Madhavan Menon said in an interview to ET.

“The vast majority of players in our travel industry are small proprietors, some of who are dependent on credit. I’m not sure how they are handling this whole thing. Be it an airline, be it one of our competitors, I believe the industry has gone through a fair amount of turmoil over the last six months,” he said.

Larger players like us have elaborate risk management systems enabling us to manage such situations, ” he added.

Cash-strapped Cox & Kings has defaulted on debt obligations worth Rs 325 crore, four times in three weeks. Lenders have revoked part of the promoters’ shares in the company pledges against loans. Its stock has taken a battering in the markets and it has been downgraded by ratings agencies.

“I am very uncomfortable about what is going on because the whole industry is being tarnished by what has happened to one company,” said Menon.

Asked whether Thomas Cook would look at investing in the company, he said the company hadn’t had a close look at Cox & Kings’ numbers.

Menon claimed Thomas Cook India wouldn’t go down the path of its rival.

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“You know we are at the other end of the pendulum. We are debt free. We have about Rs 750 crore in deposits and mutual fund investments,” he said.

“We continue to be acquisitive. All our businesses generate free cash and are not dependent on debt and this is how we have kept our leverage very low. In fact, if you calculate our leverage, which stands at 0.5 at a standalone level. The other thing is that we generate a lot of free cash. On an average, the group generates about ?300 crore of free cash. At the India level we have Rs 200-250 crore. Look at the history of Thomas Cook, We have not had any capital infusions over the last twenty years with the exception of one instance in 2014 to part fund the Sterling Transaction. All the funding acquisitions have been entirely from its own cash generation,” he said.

The travel industry has also been impacted as Jet Airways, India’s oldest private airline, stopped operations on April 17, running out of cash to keep afloat. Menon said that the Thomas Cook Group took a write down of Rs 2.28 crore on account of Jet Airways in the financial year ended March 31, 2019.

Menon said demand for leisure and corporate travel haven’t been impacted despite the overall credit squeeze in the market. He said end of season bookings are still higher by 12-15% this year.

“But dealer incentives could be a potential area of pressure. The third quarter will be an indicator of what it will look like. And of course the fourth quarter, because a lot of the incentive planning is done around that time,” he said.

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Menon said the hiving off of Quess, the human resource firm it had part acquired in 2013, will happen in 2-3 months. It listed Quess through an IPO in 2016, but decided to hive it off as their “business models are different”.

Under the spinoff every Thomas Cook shareholder will get shares in Quess proportionate to his or her shares in the parent company. Thomas Cook owns 49.02% of Quess.





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