💰 Financial Performance

Revenue Growth by Segment

Consolidated revenue for Q2 FY26 grew 3% YoY to INR 20,738 million. Segment-wise performance: Travel and Related Services grew 6% to INR 16,891 million; Financial Services grew 1% to INR 845 million; Leisure Hospitality & Resorts declined 13% to INR 1,044 million; and Digiphoto Imaging Services (DEI) declined 6% to INR 1,958 million. For H1 FY26, total revenue reached INR 44,818 million, a 9% YoY increase.

Geographic Revenue Split

The Travel segment, contributing over 75% of total revenue, is split between India and International operations. India DMS saw a 10% decline in sales for Q2 FY26 due to regional conflicts, while Asia Pacific (Asian Trails) reported 18% YoY growth. USA (Allied T Pro) turnover was subdued due to sentiment shifts, while East Africa and Southern Africa operations remained stable.

Profitability Margins

The group maintained an operating margin of 7.1% in fiscal 2025. Sterling Holidays (Leisure Hospitality) reported H1 FY26 margins of 32%, with a target range of 30-35%. Financial Services maintained healthy EBIT margins of 49% in Q2 FY26. However, consolidated EBITDA for Q2 FY26 fell 12% YoY to INR 1,470 million due to business mix shifts in overseas DMS and higher costs in the imaging segment.

EBITDA Margin

Consolidated EBITDA margin for Q2 FY26 was approximately 7.1%, down from 8.4% in Q2 FY25. This 130 bps compression was driven by a shift toward lower-margin business in the US market during its peak season and a 6% increase in employee benefit expenses to INR 2,797 million.

Capital Expenditure

The group estimates annual capex obligations (excluding leased assets) at INR 70-80 crore per annum over the medium term. Sterling Holidays is actively investing in resort expansion, having launched 7 new resorts in Q2 FY26 alone, contributing to a 28% YoY expansion in the resort portfolio.

Credit Rating & Borrowing

CRISIL has assigned a 'Positive' outlook with a rating of CRISIL AA-/A1+. Borrowing costs are reflected in an interest coverage ratio of 6.6 times for fiscal 2025, which is expected to sustain above 5 times. Consolidated external debt stood at INR 484 crore as of March 31, 2025, with repayments of over INR 100 crore planned over the next three fiscals.

⚙️ Operational Drivers

Raw Materials

Cost of services (74% of revenue), Employee benefits (13.5% of revenue), and Other operating expenses (7.4% of revenue).

Import Sources

Not applicable as a service-oriented company; however, inventory is sourced globally for travel packages and digital imaging supplies across 15+ countries including USA, Thailand, and Indonesia.

Key Suppliers

Key partners include Mastercard and Visa for forex operations, and various global hotel chains and airlines for the travel segment.

Capacity Expansion

Sterling Holidays expanded its resort portfolio by 28% YoY in Q2 FY26, reaching a milestone of 7 new resort launches in a single quarter. The group also expanded its forex distribution by opening a new outlet in Varanasi in December 2025.

Raw Material Costs

Cost of services increased 4% YoY to INR 15,314 million in Q2 FY26, representing 73.8% of total revenue. Procurement strategies focus on cost optimization in high-volume markets like Thailand to offset margin dilution in the US.

Manufacturing Efficiency

Hospitality efficiency is measured by RevPAR, which grew 11% YoY in Q2 FY26. Occupancy was impacted by 40% of inventory being in weather-affected regions like Himachal and Uttarakhand during the quarter.

Logistics & Distribution

Distribution is driven by a mix of physical branches and digital platforms. Retail forex turnover grew 13% YoY, supported by paperless transfer technology and new physical outlets.

📈 Strategic Growth

Expected Growth Rate

11%

Growth Strategy

Growth is driven by a 'transformative thrust' on the resort business (28% portfolio expansion), tapping into growing forex demand via new regional outlets (e.g., Varanasi), and a structural reduction in costs. The company is also transitioning its DEI segment toward a higher-margin software-led model despite short-term revenue flattishness.

Products & Services

Foreign exchange (Forex) cards and cash, corporate travel management, leisure holiday packages, visa and passport services, resort stays (Sterling), and digital photo imaging services (DEI).

Brand Portfolio

Thomas Cook India, SOTC Travel, Sterling Holidays, DEI (Digiphoto Entertainment Imaging), Asian Trails, Allied T Pro, Desert Adventures.

New Products/Services

Launched 7 new resorts in Q2 FY26. Expanding retail forex via paperless transfers and new physical distribution points to tap into the 'overseas education' and 'holidays' segments.

Market Expansion

Expanding forex footprint in Tier 2 cities (Varanasi) and growing the Asia Pacific DMS business, which saw 18% growth in Thailand, Indonesia, and Malaysia.

Market Share & Ranking

Leadership position in India's integrated travel and foreign exchange segments.

Strategic Alliances

Strong support from parent Fairfax Financial Holdings Ltd (77% stake). Partnerships with Mastercard and Visa for the prepaid forex card business.

🌍 External Factors

Industry Trends

The industry is seeing a shift toward digital/paperless forex transactions and a surge in domestic leisure travel. Thomas Cook is positioning itself by expanding its resort portfolio and automating branch processes to sustain a 7%+ operating margin.

Competitive Landscape

Competes with online travel aggregators (OTAs) and specialized forex players. Differentiates through an integrated 'one-stop-shop' model and physical presence.

Competitive Moat

Moat is built on a leadership position in Forex and Travel, a massive distribution network, and the financial backing of Fairfax. The diversified business model (Travel, Forex, Hospitality, Imaging) minimizes the impact of seasonality.

Macro Economic Sensitivity

Highly sensitive to global travel trends and domestic consumer discretionary spending. Fiscal 2025 revenue growth of 11% reflects positive macro tailwinds in the Indian travel market.

Consumer Behavior

Shift in sentiment in the US market led to weaker Q2 performance. In India, 35-40% of retail forex customers still prefer some cash, while the rest move to cards.

Geopolitical Risks

Protests in Nepal and India-Pakistan conflict advisories led to a 10% decline in India DMS sales. Ongoing Middle East tensions remain a monitorable risk for global travel sentiment.

⚖️ Regulatory & Governance

Industry Regulations

Subject to SEBI (LODR) Regulations 2015 for disclosures and RBI guidelines for foreign exchange operations. Compliance with travel advisories and visa regulations across multiple jurisdictions.

Environmental Compliance

Not specifically disclosed in INR, but hospitality operations are subject to local environmental norms for resort management.

Taxation Policy Impact

Effective tax rate for Q2 FY26 was approximately 35.8% (INR 393 million tax on INR 1,098 million PBT).

⚠️ Risk Analysis

Key Uncertainties

Geopolitical instability impacting travel (potential 5-10% revenue risk), severe weather impacting hospitality (13% segment drop in Q2), and slower-than-expected ramp-up of acquired businesses.

Geographic Concentration Risk

Over 75% of revenue is travel-related, with significant exposure to the Indian domestic market and key international hubs like the US and SE Asia.

Third Party Dependencies

High dependency on airline partners and global hotel inventory for the travel segment, and Mastercard/Visa for the forex segment.

Technology Obsolescence Risk

Risk in the DEI segment addressed by transitioning to new software and digital imaging platforms; retail forex is being digitized to prevent loss of market share to fintechs.

Credit & Counterparty Risk

Financial risk profile is 'comfortable' with a TOL/TNW ratio of 3.2x and strong liquid surpluses of INR 2,070 crore.