Thomas Cook (India) Ltd

Ladies and gentlemen, good day and welcome to Thomas Cook Q2 FY25 Earnings Conference Call hosted by IIFL Securities Limited.

Thank you Joshua. Good evening everyone, welcome to the Thomas Cook (India) Limited Q2 FY25 Earnings Conference Call.

Thank you Arun. Ladies and gentlemen, a warm welcome to the Quarter 2 FY25 Earnings Call of Thomas Cook (India) Limited.

Thanks Madhavan. Good afternoon everyone, and I will just take off from where Madhavan left, a quick summary on the numbers that we have at a consolidated level. We look at the income from operations, we grew by about 9% as Madhavan said from Rs 1871 crores to Rs 2043 crores. And what worthy here is to look at the PBT number as Madhavan spoke about the PBT margins, we expanded from about 4.1% to 5.2% that's about 110 basis points improvement on the PBT margin. If you look at the absolute number, we delivered a PBT of Rs 106 crores, which is more comparable with what you look at a seasonally very strong quarter, which is the April, June quarter.

Yes, thank you Mahesh. So, as Madhavan said, and Mahesh was alluded to it, the DMS business as well as the inbound in India grew by about 25%during the quarter. Of course, this is not the season for the inbound business in India. This isn't really starts on October and goes on till early April. But nevertheless, in spite of that, it has a descent quarter. The overseas DMS business grew very strongly, especially markets related to Southeast Asia, where you have entity called Asian Trails, we saw good growth in countries like Thailand, Indonesia, Vietnam and Malaysia, as well as Singapore. Likewise, in US, our unit Allied T-pro experienced strong growth in this quarter, largely because of group travels. And South Africa delivers steady growth in this quarter with focusing mostly on the group travel as well as MICE.

Yes, sure thanks, Debasis. And good afternoon, ladies and gentlemen I am Vikram Lalvani, the Managing Director and CEO of Sterling Holiday Resorts Limited. I am based in Chennai, and I am also joined by Mr. L Krishna Kumar, our Chief Financial Officer of Sterling. It's such a privilege to speak with all of you again today. I am pleased to announce that Q2 FY25 marks our 17th consecutive profitable quarter at Sterling. Q2 is typically the leanest quarter in the leisure business as we are all aware. Sterling has delivered a respectable EBITDA margin of 32.7% up from 31.9% in the same quarter last year. Our EBITDA has grown by 25% from Rs 313 million to Rs 391 million, and our EBIT has increased by 24% in value terms, resulting in margin improvements of 80 basis points and 50 basis points respectively. From a turnover point of view, we have grown by 22% reaching close to INR 1200 million. During this quarter we also took the opportunity to ramp up our inventory supply, and we have added and opened five new resorts in the previous 90 days. This brings a total resort count now to 54 resorts across 47 destinations in India, and with over 3000 rooms. So, Quarter 2 actually we had two milestones achieved. One is the 50 resorts, and the second is 3000 rooms. I am also pleased to announce that we have achieved these two milestones in Quarter 2 by September 30th of this year.

I would now like to pass on and hand this over to Mr. Ramakrishnan, who will talk about DEI.

Good evening ladies and gentlemen. My name is K S Ramakrishnan, I am the president and CEO of DEI. We at DEI had a fairly challenging, but anticipatedly challenging quarter.

I will draw your attention to the last paragraph in my statement made in the press release, is that, so far our primary, our first priority was recovering the business volumes, and our focus looking forward is on ensuring sustainable growth and profitability. This is an important point that I would like to reiterate, because it does allow a degree of change in our focus. Thank you.

Thank you so much. We will now begin the question-and-answer session. The first question is from the line of Chetan from Systematix. Please go ahead.

My question is on DEI, where all our businesses are showing steady growth, DEI has seen a high single digit decline in the first half of the year. So, what kind of growth and margins can we expect for the full year and for FY26?

First of all, before I hand over to Ram, let me also just remind everybody on the call that it is against our policy to make forward looking statements. So, we can talk about the performance of this quarter for which this call is intended, and we can talk in general without any numbers, about how the business is shaping up in the current quarter. But if you want definite guidance in terms of numbers for the rest of the year or even the year after, we would be constrained to avoid that. Thank you so much.

Qualitative guidance would do.

So, to answer you, as I said, the last quarter in fact the last two quarters are not our best quarters. Our best quarters are the next quarter, that is October to December and January to March. From that perspective, fundamentally, our business is looking robust and strong from our operational perspective. We did close US, and that was a sizable reason. The reason we closed it was it not profitable. We took that call to make sure that we focus towards only profitable businesses. So, on that aspect we are staying pretty comfortable. As I said, one of the biggest reasons was the geopolitical scenario. 50% of our business is focused between Middle East and Maldives and that, I guess I won't have any foresight of how quick it will get settled out. The current trend looks that it's getting better, and hopefully we should not have the same thing recurring next year. As far as future goes, we are, as always been focusing on growing our business. We have been signing new businesses all the way through for the last couple of years, and that will continue.

Okay, thank you. And one more question, what is the cash for the business, excluding the restricted cash for forex as on the end of the quarter?

Okay, so we have over Rs 1800 crores of cash on our balance sheet on which about close to about Rs 1500 crores is on account of the float. So, the balance can be considered to be unrestricted. And by the way, I would also like to mention the BPC cash is not really restricted, yes in terms of of long term usagewe cannot use that money for long term but it is perfect within the rules to use that money for short term purpose, for managing working capital.

Thank you so much. The next question is from the line of Dhaval Shah from Girik Capital.

I have a couple of questions. Sir first question, bookkeeping one. So, what is the India outbound number for the quarter, which was 610, last quarter?

Dhaval, this is Mahesh. Thank you so much for the compliment on this performance with that number that you are referring to is Rs 385 crores.

385 this is including both long and short right?

Excludes domestic.

Yes, exclude domestic, this is outboard India, including long haul and short haul.

Yes.

Got it. And sir, my second question is, on that RBI, some paper which was floated, I forget the name which was we should have basically led to consolidation in the forex market. So, any new development happening on that, you would like to highlight?

Dhaval, we haven't heard on that. We understand that there have been conversations and if I have to just look at an indicator for that, in the recent past over the last two quarters, RBI has been cancelling a lot of FFMC licenses, and there will be multiple reasons for it, not saying this is directed towards that policy only, but a lot of cancelation that I have seen indicates that, RBI is likely to move in that direction, but I am conjecturing at this point, I don't have data to do that, but on this specific policy that we referring to which is around consolidation and trying to govern a few set of entities. There has been no fresh update, either from RBI or no discussion paper. Obviously, there was a discussion paper that was rolled out. And as industry participants, we have participated and given our view also on that.

Got it. And sir my third question is again, on the outbound travel so broadly when we talk about upgradation of the consumer, more premiumization. So, in our outbound business, how do we see a customer upgrading. So, one is, taking its first foreign holiday, or it could be taking one more holiday, and within that foreign holidays, do you see a trend where, they are upgrading from your say, a different categories of packages, an upgradation within that anything, just to understand the trend of how the spending is changing over the last three year period?

Last three year may not be a good comparison at this point in time, purely because we have seen only recovery coming from ‘23 and we are in ‘24 so I really don't have a ‘22 data to comment on, but just to give you a sense on how the market behaves, typically we can acquire customers as first time holiday seekers going overseas, or they could be domestic travelers. You will appreciate that Thomas Cook was not a dominant domestic travel player prior to 2013-14 it's only in 2013-14, that we started to do some noise around this business, and we build it to scale at this point in time. And, India is a very dispersed large market, so we are not relevant at every place. We are looking at certain markets, certain states and then we are very focused on those, and that's where we want to continue to build, because otherwise we will be very irrelevant and a small market share in many of those parts where people travel to. So we have chosen our space where we want to be, and we are wanting to stay relevant to that market that's point one. Point number two, from a customer lifecycle or customer journey point of view typically, it could be acquired as a domestic customer, who then probably will take a short haul trip with us and then migrate to become a long haul traveller. Even if he comes to us as a long haul journey, he may probably start with a group tour around Europe, and then probably go to US and Australia again on group tour. And in most cases, what we see is that people who actually have gone on a group tour either to Europe, then become an FIT customer and you want to do a little more deeper to understand the culture, experience the culture, food and others in those specific countries. So, that's the journey typically customer follows.

Interesting. And lastly, sir this Cox and Kings has been acquired by a PE and so any comments you would like to give with regards to, what you expect in terms of competition, and they have acquired couple of Indian brands also, holiday package brands. So, any thoughts on that. So, last two years, when we were discussing about the players in Indian market there, as SOTC we

Dhaval, it's just an announcement of that having acquired the brand, it's too early to make any pronunciations about how successful the brand will be at this stage, so we will refrain from commenting on it. Let's wait and see. This market is big enough for another startup.

Interesting and any inflationary pressure do you see on your cost going forward?

So, Dhaval not actually if you see, as I mentioned, if you look at our EBITDA and EBIT margins, we have been holding steady on our gross margins, or rather improved in some cases, like on forex, we have improved by about 10 basis points, if you look at the holiday or the B2C side of it, we improved by about 50 basis points. So, we are seeing some expansion on margin, low inflationary pressure at this point in time. And we have been fairly good in terms of managing our costs also, and discretionary cost, where it has to be. We have been very cautious about how we spend our money, and as I said, our focus has been on the digital adoption, we have been spending money on the technology side of it, improving productivity. So, we are trying to fine balance that, so that the inflationary pressure, it will come by some point in time. But we are managing it even better, just to give you a case in point, if I look at the H1 numbers, or rather the cost numbers they still trend 15% below what we were in FY20. So, to that extent, we are managing it fairly well.

I will also add that some of the input cost in our industry have been high for some time, especially airfares and hotel rates. So, these are stabilized so any inflationary pressure in terms of the costs other than maybe salaries, in reality may not be significant.

This you meant for domestic, hotel and airfare, or overseas also?

Understood. So, in that context, generally if we compare some domestic destinations, the airfare plus the hotel is expensive, then going to Southeast Asia, or going to Dubai, or somewhere in nearby on a short haul outbound. So, are you seeing a trend, more and more trend we have been discussing this since couple of quarters on the call, but you see that trend continuing and increasing where customer is making a comparison and then taking a outbound package?

So, Dhaval, people do that comparison, they will compare a domestic versus a short haul to that extent. But please remember that when you look at the domestic in the price point that you see high either whether it's on the hotel or it's on the airfare, this is more like the weekend, holiday, long breaks, kind of a period. There are the shoulder months, or the shoulder weeks or shoulder days, where you actually don't find that kind of high price, the data point that Madhavan was also referring to is that, you look at our corporate travel, and that's a good barometer that we use, if you look at the average ticket price on the domestic side, they have remained flat compared ‘23 to ‘24. On the international side, actually we have seen close to about a 1% dip, average price.

Okay, great. And sir on MICE, how many in terms of the corporate holidays, what we do for corporates, that would, how many new customers you would have added in last one year, any data point you can share?

Not offhandedly, but I guess if I have to just do a quick backup done, look we would have added about 20, 25, 30 customers to our portfolio. On an average two customers a month, that's the kind of run rate we run.

Thank you so much. The next question is from the line of Neerav Savai from Abakkus.

So, my question is pertaining to this other income part, is it mainly related to the forex float which we have, or any breakup if you can provide?

Largely, hi this is Debasis here. Largely the increase in other income, which has gone up from Rs 27 crores to Rs 43 crores, is contributed by the additional interest on the bank deposits.

So, generally, on every quarter basis, we see some fluctuations happening because, you put the forex part separately, and then there is other income apart from the forex part. So, how do we see this going forward, at least for FY24, excluding the forex part, any number if you can help us out with?

I can't give you a number, but as a principal again, it's very easy to say that the interest and bank deposit will continue and actually will rise with the volumes, because the company has a lot of cash, which is trying to deploy in safe deposits with banks and other places. And therefore the returns of that will continue to increase the other income. Of course, things like exchange gain is something that we can't predict that would obviously fluctuate quarter-on-quarter, but the bank interest and deposits will continue.

Alright. The second one was on the tax rate side in the last call you had alluded that you will continue with the previous regime for FY25 and how long would this continue, even for FY26 would be having higher tax rate, or how do we see that?

So, you need to consider the fact that Thomas Cook is not one company. We are talking about multiple companies in the group , for example there are four companies in India, four large companies in India or rather I can say five. , Except Thomas Cook, others have shifted to a 25% tax regime. However, Thomas Cook is in old tax regime because of reasons which I have spoken and you are also aware of it because of carry forward match benefits, et cetera. And it will take us another couple of years to sort of utilize that and move out of it. Thomas Cook continues to as on a standalone basis, continues to be the most profitable and therefore the tax rate, the Thomas Cook pay, plays a significant role in determining the overall effective tax rate. And of course, overseas entities have taxes at various rates that also has a role to play in the overall ETR.

So, I understand the overseas would be relatively much lesser than 34% we are paying here, right?

May not be actually, we always think that taxes overseas are lower. It may be lower in places like US for example, when the last President brought it down. But there could be higher in certain other destinations.

Okay, so overall at consolidated level.

Finally, one thing that I started off with this, and let me also end with this. One thing that we need to keep in mind is, what is the contribution of Thomas Cook as a standalone entity to

Subsidiary performance and international companies would have also become profitable now, which were not there, particularly last year?

There is also a seasonality matter, like for example, in a given quarter, some units made profitable, but other units may not be, so even in a like for example, let's talk about TCI. TCI will not be profitable in the first six months of the year because the season starts from October.

Right, but 32% is something which you feel at consolidated level and annual basis, it should be?

Yes, there could be a percentage here and there fluctuation, but by and large that's the guidance.

Right. And lastly, what could be the total value of land which we are holding now?

Vikram would you like to answer that question, what is the total value of land held by Sterling?

This is what we have, so close to Rs 500 crores.

Okay. And Sterling would not be using it as the asset light model is something which will continue going forward?

Yes, we are using an asset right model right now, when we get into green fields, we will evaluate at the right time when to get into green fields, the opportunity is there right now to ramp the portfolio using an asset right model, because that's a faster way of ramping, number one.

Thank you so much. The next question is from the line of Deepak Lalvani from Unifi Capital. Please go ahead.

Sir my first question is on the B2C travel, we have recovered about 60% versus the pre-COVID levels in the first half. So, can you provide an outlook on this number going forward?

Deepak, hi Mahesh here. We have been talking about it in the last two calls again, and I will repeat this , the patterns of travel have changed. Our guidance remains to the fact that we expect this to recover close to 85% to 90% for the full year. We are not changing that guidance at this point in time, unless something changes in the external environment. The mix of the business definitely will change it was driven by long haul in the pre pandemic. It's driven more by short haul and domestic now, we remain committed to that change of 85% to 90% recovery to the pre- pandemic at this point of time.

Understood. And sir we were earlier indicating a higher number. So, this 90% recovery, how should we read this number, is there a challenge on our market share and relevance of a product, or?

It's got nothing to do with market share. You must realize that we have to sell what the customer buys. If there is no demand for the long haul, or if there are challenges around visa and others, we will not be trying to push that market, because we will be spending marketing dollars trying to create a demand for which doesn't exist in the marketplace. So, clearly, we have to go out with products that customers buy. And today, if you look at the social media, people are talking about destinations like Baku, Azerbaijan, Georgia, Vietnam, and that's the flavor of the season. So, I would rather put my money where the mouth is, rather than trying to close the money on destinations that are currently not seeing traction, that's point number one. Point number two, Madhavan spoke when he was talking about the B2C business, because B2C also includes Hong Kong. Now, in terms of recovery on Hong Kong because its dependency on the China traffic, we expect the recovery on Hong Kong only to be at about 50% for the full year, or maybe 55%, 60%. So, there is some shortfall that's coming out from the, but from India business point of view, you actually see the recovery to be closer to the 85%, 90% that we have been consistently maintaining.

Understood. And so your growth in DMS business is actually phenomenal. So, what is backing this growth, what is the company doing, the initiative if you can explain, that would be helpful, and should this growth rate sort of continue basis your initiative that you have taken?

So, I will take that question. Debasis here. So, we have executed a turnaround strategy for the DMS business, and we started this process soon after we acquired the units, but obviously our effort got delayed because of COVID. But now post COVID we have been able to execute the strategy that we had in mind, which consists of several things, actually very, very briefly if I talk about the key initiatives, it was around rationalization of cost, automating the entire business, and also finding new customers from new source markets. So, this has been executed over a period of time, and we are now seeing the benefits of that. So, this is not something that will, it's not a flash in the time this is going to be a sustainable thing. It's an initiative that will sustain over a period of time. And therefore we do not see any reason why the growth rate would dip. Of course, if there is geopolitical disturbance like what we have seen in the Middle East, those sort of disturbances will happen, and honestly we cannot do much about that, but at an overall level, the growth will continue. This is what Madhavan also alluded in his opening remarks. This actually shows the benefit of having a diversified portfolio, a geographically diversified portfolio to be precise, so even if one region is affected by circumstances beyond our control, the other units will continue to flourish.

Sure. And thirdly, my question is on the Sterling business, we have done well on the cost side. Sequentially, our cost are down despite opening new resort. So, how should one view the cost line item and the EBITDA margins for the segment?

Vikram you may like to answer the question?

I am so sorry, can just repeat the question again please?

Yes, sir. So, our cost in the Sterling business are down sequentially despite opening new resorts. So, how should one view the cost line item and the EBITDA for this segment?

See, we open five hotels this quarter. But a lot of these investments in those five hotels actually were executed in quarter one, I would say in the months of May and June, because lot of these hotels would open July, August and September. So, a lot of large portion of these costs are actually consumed in quarter one, which gets reflected in quarter one. So, as andwhen we open the hotels, we don't incur that expense of pre-opening only on that day when you open it, we actually incur it at least 30, 60 days out. So, therefore, when you opened five this quarter, we

Sure it does. And sir, what should one look at the EBITDAs for the segment, because on the last year basis, in Q1 we were down, so for the full year what should one look at?

Again, I will not give a particular guidance number, but let me tell you that while we saw the headwinds in Q1 we were still, while we may have been down even over the last year, we still maintain a healthy EBITDA of 33% despite the impacts even in Q2 we are about 30%, 32% and most of the hospitality industry that anything between 31% is a very, very healthy EBITDA. So, even going forward, depending on seasonality, if you look at it from a hospitality’s point of view, we will be in the range of how the hospitality play is at this point in time, obviously we will try to have a premium over the rest. If you have to see Q3 and Q4 they are much better quarters involved compared towards Q2, Q2 is always a dangerous quarter for leisure, and weather could also play the spoil sport. This year thankfully only happened in one small region. It did not happen in most of the other regions as well. So, that's how it's adding out to be.

Got it, thank you sir.

We will continue to invest in leadership because these keep adding on to the revenue lines ad in most of these cases, it was mentioned when I had opened most of these resorts in March and right up to Q1 and Q2, in those regions like Rajasthan where we needed to ramp, which was traditionally not the season at that time, but we had to open those hotels, other which ways you would miss the season even this year, so which is why we have seen the ramp in those hotels from October onwards.

Thank you so much. The next question is from the line of Mithun Aswath from Kivah Advisors. Please go ahead.

Just wanted to get a sense on the travel related business, you have seen improvement in margins despite this quarter revenues being lower quarter-on-quarter and not really being the season. What actually drives your margin, because obviously last quarter was

Mithun, hi, this is Mahesh here. I am not sure why you treat this as the last quarter not being a good quarter. I thought we had a strong set of numbers that we delivered in a traditionally strong seasonal quarter. So, I would like to stand that corrected on that one, on the point of saying what worked in the current quarter, we have spoken about it in the initial field also, and Debasis also spoke at length about it when we spoke about the DMS business. There are two or three trajectories that have helped the margin improve in the current quarter. And I am specifically referring to the EBIT margins which has moved up from close to 3.9% to 4.9% that's 100 basis points improvement. The drivers for it is obviously the DMS business. And I am talking in the order of priority. DMS business because some of them were either loss making or break even, they have all started to make profits. So, those are added to the profit that we stayed on so incremental revenue has gone into incremental profit also. Cost base remaining the same. Also, if you look at the B2B and B2C businesses within India, they have registered a strong growth. They have had 11%, 12% growth in some of the major markets, and they have also expanded their margins by about 30 to 50 basis points, all of which has added to the increase in the EBITDA and the EBIT margins. Also to mention here, our focus has been on productivity improvement, technology enhancements, all of this which helps in reducing or keeping on cost constant on an higher increasing revenue base.

Right. I am just trying to understand in the first quarter we didn't see as strong a EBIT margin. So, is it that the seasonality of the DMS businesses will actually kind of drive the quarterly differences in EBIT margin. That is what I am just trying to understand or is this structurally an improvement which we will see quarter-over-quarter now?

So, Mittal the way we have said it, and you will recollect, and I will request that you look at the transcripts of our previous call, we have guided the market to a 5% range on the EBIT margin for the travel business as a whole. Now you will appreciate that there is B2B, B2C in it and there is seasonality of business it's in within India and overseas DMSs, so obviously we will find a quarterly fluctuation that will happen in this. But overall, we will look at for the year, it should end up at closer to that 5% mark, which is what our guidance to the market is, and clearly, as I said again, the drivers for it is, the margins previously did not stack up because some of this overseas DMS weren’t in the profitability, and now they have started to become profitable, and they will continue

Right. So, when you say 5% range, we are almost hit that or do you say the overall for the year will be 5% so the next two quarters will be better?

We are not saying that it will be better, but we are saying that we will work towards a 5% range for the overall travel segment, that's the guidance. So, you will have a quarter where it will look like a 4.2%, 4.3% because of some markets not firing or some business not firing but overall, our endeavor is to push the margin towards a steady state of about 5%.

Thank you so much. The next question is from the line of Sukant Garg from Equible Research Private Limited. Please go ahead.

My question is specifically from the app business. What kind of numbers do we have from Thomas Cook app and given these times where people mostly go online to search for travel needs, what is our focus on this app business?

So, there are two parts to this Sukant. One, while I mentioned about it, I was giving a reference to the foreign exchange app, which we just launched it's pretty young in that sense. We have seen some fairly decent traction. Am I quite pleased about how we performed? No. Maybe there's a lot more for us to do, and you will appreciate that a lot of GUI changes and customer experience that comes in will enhance the usage of the ad, and the app, and we have to create more use cases for the customer to keep coming back on the app so that’s work in progress. On the holiday side of it, we enter the reference that you made. People are going online, we have always said we are an omni channel operator, though we allow the customer the choice of choosing the channels that he wants to access us from. It could be a physical, digital it could be a call center, or a combination of all. That's how we enable the customer to come. Are we focused on pushing the customer to an app? Yes, we are doing that to the extent that it's a straight through, so somebody coming to book probably a holiday or a vacation to Goa, or looking only for a flight option to Goa, we will try and nudge him to go to the app so that I don't have to spend my expensive labor, priceless and expensive labor, to end up service that customer and rather pursue a straight processing so yes, app has its own advantages and disadvantages. Advantages in the sense that, you could reduce your cost base lower, disadvantage is that, that much more upselling opportunity is reduced. So, we will have to fine balance that, it's a journey we are also upgrading our app because we also believe that for it to become a self-serve customer, customer usable app, there are changes that we need to do.

So, I can say that our share from the application business is going to increase in future for you or the competition like make my trip or Yatra have such high app downloads, and the customer accessing those apps will hamper your business in future?

The way I would look at it is that, our digital businesses will continue to grow that's our focus, that's going to be but it's a choice that the customer makes how he wants to come across to us. We will nudge the customer to go digitally and transact with us, but please understand for an experience business that we are, for an higher ATV business that we are, a lot of customer choose to work with us offline or through a contact center. And that's how this business is stacked up, but yes, if you look at from a trajectory point of view, our online adoption, or rather our online penetration on the holiday business in specific was in single digits prior to the pandemic we are currently closer to about 15%, 16% so, we kind of improved our journey there, and we will keep investing in growing that journey as we go along.

Okay. Another question is for from Sterling Resorts, I believe you said that you are pausing some new customer acquisitions for the resort, have I heard it correctly?

I am so sorry, I didn't get your question again can you repeat it, please?

So, I just heard, while on this call only that you are pausing new customer acquisition for Sterling Resorts. Have I heard it correctly or is there some?

That’s right, we had paused it for the long term membership last year in July, and we have not bought even the short term membership, which is a 10 year product.

So, just wanted to know why we have done this in the light of where we have only 50% occupancy in those resorts there are lot more that needs to be covered. Is there any specific reasons for that?

See, the idea is actually to move towards the hospitality segment, we understand that there is a headroom in occupancy and despite the fact that imagine the headroom we are able to actually meet actually, our growth will be far more phenomenal. We believe that, the hospitality

So, are you saying that we will be in spite of holding down new customer acquisitions, we will be, still be moderating or still be moving into the resort like the hotel business kind of a thing?

Yes, that’s the idea and only the member acquisitions have stopped. We are servicing the existing members that we have and in fact, if you see that is also an advantage for us, because fulfillment is happening even during weekdays which is traditionally a low demand period.

Thank you for that. Just want to have one remark, kind of a suggestion that we have, have asked a question on application, and my point with the application is that, because we have a very low kind of star ratings on applications of Thomas Cook with certainly, I am not say bad, but certainly not so good reviews. And if we can monitor that, we can get away with that. That would be a nice thing, as I have heard with my own friends that, using Thomas Cook they first go to the application reviews and then might contact Thomas Cook for that, use it as a suggestion and nothing else, so that’s all.

Sukant thank you so much for that suggestion. We take that on board, and I will just like to reiterate here, look our app journey is not fully developed, and one of my colleagues here in the room just reminded me that our website that we use is very mobile friendly, so our journey has

Thank you so much. The next question is from line of Akshat Bairathi from RSPN Ventures. Please go ahead.

So, I have just two questions. One is on the financial service margin guidance. So, we have been guiding the market for 45% and we have done around 50%, so would you like to reiterate the guidance, or are we seeing any, are we expecting any dip in the H2 and my second question is a book keeping question. So, in your segment results, there is a line item below EBIT that is common expenditure. So, before just understanding, can you tell us what are the expenses that are included in this. Thank you.

Harshit, I will take the first part of it, and then leave it to my CFO to come on the second part of it. This is Mahesh, your question. Yes, we have done well in the last two quarters in terms of our EBIT margins, and it's stacking up really well, but our guidance to the market remains at about 45% doesn't mean that we are going to lose or we are going to give away the margins that we get on the business. But, it's more important that we give a steady state kind of thing, rather than talk about one offs and one time, because you will come the next time around and say that your EBIT margins have dropped. So, I don't want to be saying it. I am talking from the lens of saying what the business is now it operates. Obviously, if there are opportunities for us, there are these onetime things that come our way, and we take the benefit of that. Clearly, you will see a shift that may happen over a period in time when our portfolio on the prepaid card keeps growing, because that's what the dependency on cash will go down. And when you look at the prepaid you will not only make exchange margins, but you also make money on the float, which all adds up to the overall margins in this business. That's the way it stacks up, but it's a journey we continue to be guiding the market to the 45% but obviously we are not going to leave away any opportunity that comes our way to grab that additional business (1:13:50) that come.

On the second part of the question, which is on common expenditure, these are expenditure incurred which is not allocated to any of the businesses, any of the four segments, but kept at central level, those are the expenses, and those are regular I really don't see too much of movement in those expenses. So, you can consider whatever the current level expenditure that will continue for guidance.

Thank you so much. The next question is from the line of Meet Shah from Finovate.

My question is B2C side of the business. While we have given the new guidance of around 80% of the recovery of FY20 numbers, despite lowering our guidance, we still need to grow 70% in the second half of this year, and generally the second half is kind of slow compared to the first half. So, do you really see that we would be able to meet this number?

So, Meet, as I said, you have to also look at the overall portfolio as to how it's shaping up, the deficit that you see is coming out of the long haul, and not necessarily out of the short haul, short haul and domestic is actually firing. So, for us, when we look at a holiday, we are holiday makers for our customers. We are experienced creators for customers. So, we look at it as an overall portfolio. Well, obviously it's important to look at as to how different parts within that portfolio also play out. But if the customer preferences are changing, we want to be staying relevant to that preference of that customer, that point number one. Point number two, as I mentioned, we have not seen smart recovery as well as one of our B2C business, which is overseas in Hong Kong, as in that recovery sub par, and we don't expect that to change dramatically over the next six months or so. So, that's also a bit of a drag on the overall numbers. But from a growth perspective, and if I have to just look at some of those forward looking trends that I am seeing, I feel very confident to the guidance that we have given in terms of the full year.

Okay, that got it. And my next question is on the MICE side of the business, while we are seeing the slowdown in the economy, there is a slowdown in paints and FMCG sector, what kind of growth outlook you would like to give for the second half for the MICE business?

So, again, Meet. The good part of the MICE is that we start getting to get a feel of the book, the order book a little ahead because most of these events are planned well in advance. So, looking into that, we have a decent good order book. But yes, I agree and there is a bit of a slowdown that's happening in that space. The profits earnings aren’t looking up very strongly. But, you must also understand a lot of these businesses that happen on MICE are dependent on the distribution network that they have, and when the competition intensifies, they have to do that much more to keep the distribution agile and active. So, there wouldn't be too much of sharp cuts that may happen in that and when new competition, or new competitors come into the market, you have to do that much more to keep it's like running faster on the same treadmill to stay where you are. So, that's the kind of syndrome that you will continue to see. So, I wouldn't worry too much about it. We have

Okay, sure. And what about the government business, because in H1 we have seen the slowdown on the accounts of election, and what kind of demand are we seeing in H2 from government portfolio?

So, Meet, we are in conversations. There are multiple bids that are at this point in time happening. Not that government has put up a lot of bids out there, specifically in the sports category which is what we did last year. There are some inquiries, there are some that has happened in fact, I am happy to report that in the month of October, we did one such event, not the government, that's semi government in that sense. But, there are some events that are happening, and we have started to participate in it, but very early to kind of predict what the next six months will be, because some of these take a longer gestation to happen. And as you will appreciate, it's a bidding process so we will have to be very intensive and then we also need to plan for how the money cycle works, because some of those government bids money doesn't come in so very easily.

Okay. And my last question is on the Sterling Resorts, while we have seen a healthy growth in the numbers, the average room rate is at multi quarter low. Is it only on the account of inventory, or is there any another reason and any guidance or any aspirational number which management would like to give ARR and occupancy rate?

Okay. So, let me answer on the ARR as mentioned, Quarter 2 is the leanest quarter for leisure business, and we actually practically had only three or four long holidays out of the 90 days. But despite that, a Rs 5400, 5500 is still a very respectable number to maintain and hold. We operate in three different segments of hotels. One is the upper midscale, the upscale and the upper upscale, so depends on the seasonality. So, average rates also tend to start changing, like take for example in Q3 the average rates are bound to go up over Q2 because of the number of holidays that we have and the number of weddings also that we have. So, it's a lot of the seasonality factor that comes into play. So, the quarter three will have a stronger average rate realization when compared to Quarter 2. As far as the occupancies are concerned, the occupancy, as I said , we have ramped up five hotels which is almost 250 rooms over a staggered period of 90 days, and out of a base of 3000 that we have currently, that itself forms actually 8% so to that extent, the occupancy is actually

Okay, but sir I was comparing average room date on Y-on-Y basis, I feel that is comparable, if not Q-on-Q.

Technically, if you see Y-on-Y, the entire first half it takes into account both a peak season and the leaner season, except for the fact that only this year April, when we had severe headwinds because of the elections. But technically, you see even in the month of May, I will just give you an example, we did an average rate of 7,448. In the month of September, it was 5,166 and then it averaged out to what it is. So, it all breaks from the seasonality of the business and the month the average rates tent to fluctuate. This is because we have a dynamic rate system of management, number one. The fungibility of the rate can go from a 5000 level, even up to 8000, 9000 level depending on the demand and depending on the kind of season it is in. So, to that extent, the fungibility is huge, and that's the advantage that we have. We have a high rate fungibility, the mix of results will keep changing as we keep ramping up. As I said that we ramped up the resorts in Rajasthan in the first half. Now they would start producing far better ARR even in winter, because that's where the Rajasthan Hotels work, and they don't work in summers. But in summers, you have to actually try to gather volume as much as possible to cover your fixed cost and to gain an incremental amount so that you are able to get the EBITDA that you want. So, we have to look at it in totality for both what an occupancy and an average rate can both in combined produce, and that's what the entire effect is in terms of room revenue.

Okay, sir. So, if I were to look at the two years perspective, what kind of aspirational numbers which we would like to on both ARR and the resort occupancy?

See as we all mentioned, the guidance and the aspiration numbers is something that we will avoid mentioning. But let me tell you that, as I said that the current quarter is a leanest quarter. Most of our resorts have ramped, the idea is to actually sweat the asset so that we are able to grow the revenue line. It's a combination of volume and rate, we play very tactically, depending on demand & supply, depending on what happens. Someone was speaking about high, airline rates,

Thank you. That concludes the session, thank you so much.

Thank you so much. As there are no further questions from the participants, I now hand the conference over to the management for closing comments.