Mahesh Iyer, Chief Executive Officer, Thomas Cook India clears misconception, and speaks about the growth and challenges
Promoted by Fairfax Company, Thomas Cook India which has been a separate entity since 2012 has faced heat during the recent downfall of Thomas Cook Plc. However, the group has faced negligible impact during this season.
There has been a negative sentiment in the industry about Thomas Cook India post the collapse of Thomas Cook Plc. How has it impacted Thomas Cook India? What is the current financial position of Thomas Cook India?
Thomas Cook India has got no correlation with Thomas Cook Plc., the company which went to the liquidators on September 21, 2019. We are an independent company since 2012 when Fairfax acquired us. They took a 77 per cent stake in us and continue to be our primary promoter. The only similarity which we have is the sharing of the name ‘Thomas Cook’, which is governed by the Brand Licence Agreement which allows us for the usage till November 2024. We have the luxury of using the brand name at our own will and peril till 2024.
We are a profit making group and we continue to make a profit of over Rs. 100 crore ever year. We generate more than Rs. 250 crore free cash every year. We hardly have any debts in the book. Our cash position as of 30th June was in excess of Rs.1390 crore. We are doing business as usual. We launched our summer products a bit late due to the noise of the Thomas Cook Plc closure in the market. We are quite buoyant about the coming season and stepping into 2020 we see growth.
Fosun has recently acquired the brands of Thomas Cook in perpetuity for close to £11 million, which exclude brands in India, Sri Lanka, and Mauritius as we have the brand licence. We have the first right of refusal when the brand is put up for sale.
Are you planning to unveil a new brand name, as being a different entity the existing brand name can be damaging?
We always had a plan in place to come out with a new brand in our strategy. We were preparing for a transition. Thomas Cook was a well established brand and we wanted to build on that. Also, the customer preferences have been changing over the years and we were toying with the plan of creating a much vibrant, young looking brand. But, what happened to Thomas Cook Plc. got us to think about how to place that game. We have not gone to say that we would change the brand name; we have four to five years to think about it. A little bit of customer confidence has shaken in the market, but Thomas Cook is a 200 year old brand and we would like to milk the brand to our benefit, nothing has gone wrong with the brand. We are paying a small sum of money as royalty fee to use the brand name. There is good brand equity available with us and we would like to use that as much as we can before we come up with new brand.
As Fosun has taken over Thomas Cook Plc. they are very clear about not using the brand name, so I feel the problem has been contained to an extent. We are not worrying as of now. We have some more legroom to plan. We were supposed to unleash the new brand somewhere in mid 2020. Any brand migration is a bit expensive and risky, so we need to weigh our decisions.
Recently, two big names i.e. Thomas Cook Plc. And Cox & Kings have gone down, how is the travel business in general? Do you see a strong negative sentiment in the market?
I think it’s a double edge sword, on one side it bring an issue of trust in the industry. There are negative sentiments, markets are not doing well. Secondly, there were two large brands Thomas Cook UK and C&K, both going under, clearly it kind of puts a question on trust. For, Thomas Cook India, nothing has changed as our partners understand who we are. In the B2C space, we are spreading awareness and letting know consumers who we are and what are we doing. We haven’t seen impact in B2B space, as customers know us very well. In the consumer space, the week immediately preceding the collapse of Thomas Cook UK, did show slowness in demand. I would be a bit sceptical in attributing this slowdown only to the downfall of Thomas Cook UK as there were multiple factors in economy which are also responsible.
But there is a big opportunity I see; now there are only two to three national players in the space, SOTC and Thomas Cook are amongst them. We can now raise the bar in terms product offerings, reducing the discount and increasing the yields of business that we operate. The trust issue is temporary and short lived.
In the current market scenario, do you see an increase in market share or is the business going to smaller players and fragmented segment?
The organised market represents less than five per cent of the overall outbound travel from India, close to 95 per cent of the business is under the unorganised segment including OTAs and other space. In this five per cent space, we can fight for business, but the actual opportunity is that 95 per cent. The cream lies in that space. The slowdown we see and talk is always in this five per cent. As an industry if we work towards growing from five to six per cent, still there is a huge legroom for everyone to grow. There is space and business for everyone to coexist and grow.