Difficult to say if company will get delisted: Thomas Cook

Following its acquisition of Thomas Cook's 77% stake in its Indian arm, Canada's Fairfax Financial Holdings is set to make an open offer for an additional 20% in Thomas Cook India.  However, Thomas Cook India managing director Madhavan Menon told CNBC-TV18 it was too early to comment on whether the company would be delisted. 

"We are looking to go step by step; do the open offer and then see what the reaction is," he said, adding that they are still some time away from making decisions on delisting. A delisting appears inevitable unless Fairfax wants to keep its stake in Thomas Cook India at 75%, in compliance with the SEBI rule on minimum public shareholding. As per the open offer, Fairbridge Capital will pay Rs 65.48 per share for the additional stake. Thomas Cook shares closed 2.21% higher on Tuesday at Rs 62.55 per share. The UK holiday firm had announced in February that it was seeking a buyer for its stake in its Indian unit in an effort to reduce its 890 million pounds debt. Speaking about the company's plans going forward, Menon said that Fairbridge shares the same views on growth as well as expansion, and therefore the company will continue to perform at the current pace. "We will review our strategies and we will see what the opportunities are going ahead," he said. Below is an edited transcript of his interview with Reema Tendulkar and Gautam Broker. Also watch the accompanying video. Q: In the open offer, if Fairbridge Capital doesn’t get the entire amount which will enable them to delist, that is if they acquire anything which is sub-90%, then what will the next plan be? Will acquire the additional amount of stake in order to delist the company or will they pare it down to comply with the public shareholding norm of 75%? A: Let me break your question into couple of parts. First of all, we signed the agreement late last night or early this morning Indian time and as per the regulations there will be a requirement of an open offer which Fairbridge Capital will make. We have not yet gone down the root of trying to figure out what subscription, what delisting so far. But having said that, there are regulations that govern the terms of when the delisting is permitted, how it is permitted etc. So over the next couple days, we will sit down and get our hands around it and Fairbridge Capital will decide on what it needs to do as and when we come to closer to that date. Q: Does the management team stay in place, are there any changes at the management level and how does the company progress from here? A: The management team does support Fairbridge Capital, FairFax Financial Holdings and the promoter Mr Prem Watsa. Watsa is very well-known in our market; his group owns Lombard Insurance who has a joint venture with ICICI Lombard. They are long-term investors and they share our own views in terms of growth, both organic and inorganic, as well as expanding the footprint that we have. So my expectation is that you will see a fair amount of activity in Thomas Cook in the coming months as we chalk out our plans under the new majority shareholders and I am sure that we will do some exciting things. Q: You and the management team are choosing to stay on? A: Yes. The management team and I support this acquisition and we are very comfortable with the new order. I only want to add that when you go through a process like this, one of the primary focus is to ensure that the company lands in the right place. While there was a choice between private equity and a long-term investor, we thought the long-term investor would deliver the value that we as the management as well as the shareholders would look for. Q: No early indication from Fairbridge Capital if they eventually would like to delist Thomas Cook India? A: Very difficult to answer at this point in time. We are looking to go step by step; do the open offer and then see what the reaction is. There are regulatory issues around this, you are aware of the new SEBI rule regarding the timing of delisting and everything else, so I think we are some distance away from that decision. Q: Will the revenue run rate continue at the same rate or will there be some teething problems because there will be a new parent company? Financially, what can we expect in the next two months from Thomas Cook India? A: I do not expect any change in the way we operate; it’s been business as usual. We have been in this mode for several months now, but it has not impacted the company at all. I might add that our outbound season has been phenomenal. As we talk today, we have in excess of 120 coaches operating in Europe which is a big number for us and we believe that the performance will continue at the present pace. But having said that, with the new owner coming on board, we will review our strategies and we will see what the opportunities are going ahead. Q: Could there be a slight slippage in the near term because you are losing an edge given that Thomas Cook PLC has exited from the company? A: Even though Thomas Cook PLC was the majority shareholder, we had little or no business with them in terms of our operations in India. Our model in India was completely distinct with foreign exchange being the major component and tour operation as a smaller component. The parent operates aircraft, we don’t. We are distinct from them, so them going away from being a majority shareholder will not impact us at all. We have an arms length relationship in bringing tourists from the Thomas Cook Group into India and that is not going to change. I just want to add one more point that the brand will remain with Thomas Cook India for 12.5 years, which takes us into 2025 which is long distance away. Q: Any kind of infusion of money that Fairbridge Capital will put in in Thomas Cook India? Have they indicated how they plan to take forward Thomas Cook India? A: A little early to talk about this because I think we need to allow the new shareholder an opportunity to understand how Thomas Cook India operates. We need to give them an opportunity to clearly get their hands around what is a complex model. Once we have done that, I think we would sit down and discuss the opportunities in the market. You will appreciate that we have got one foot in financial services and one foot in travel, and this represents a huge number of opportunities for a company like us. So I expect some activity in the months to come, but it is too early at this stage to talk about.