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Last Updated : Oct 29, 2018 04:44 PM IST | Source:

After selling education business, Cox & Kings plans to maximise value of hotels vertical

Late last week, the company sold its education business in a Rs 4,378 crore deal.

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After selling its education business in a Rs 4,378 crore deal, travel major Cox & Kings  will look at a similar step to 'maximise the value' of its hospitality vertical when the time is opportune, said a senior executive.

The company, which made the announcement late on October 26, sold its education business to Midlothian Capital Partners, a UK-based investor.

"The objective is to grow the business and if the time is apt, we will do what we did in the education business and sell the hospitality asset. We would want to maximize the value," Cox & Kings Group CEO Peter Kerkar told Moneycontrol.


The company's hotel chain Meininger has grown from 3,500 beds in 2011, to over 10,000 beds in 2017. This year, the company plans to increase this to 15,000 rooms. "And we have 20 more deals in the pipeline," said Kerkar.

While the Group CEO said that a definite timeline has not been set for selling the hotels asset, he indicated that once the 15,000-mark is met, it could be a good time to evaluate options.

"Right now we are in growth mode, and in this mode, the EBITDA margin would be lower. We now have 13 owned hotels and are adding 7-8 new ones every year," said Kerkar.

"But once we are over 15,000 beds, and have about 25 owned hotels and will be adding about five a year, would be a good time to maximise value," he added.

Meininger posted revenues of Rs 517 crore in the last financial year, up from Rs 399 crore from a year earlier. However, there was a slight dip in its EBITDA, from Rs 146 crore to Rs 143 crore.

The deal

Meininger was part of the Holidaybreak acquisition by Cox & Kings in 2011. Holidaybreak specialised in holiday travel segment.

The education business comprises HB Education Limited (formerly known as Holidaybreak Education Limited), a wholly owned subsidiary of Holidaybreak Limited.

Last week's sale is part of Cox & Kings' plan to unlock value and maximise shareholders returns.

"The acquisition now will help the Cox & Kings deleverage, and save Rs 130 crore in interest costs every year," Kerkar said. He added that the acquisition was 17 times the company EV/EBITDA ratio.

For a while, the company had debated between listing the education vertical or selling it. "It became a question of bandwidth. We wanted to exploit opportunity in India. But having two listed companies in two different geographies could be distracting," said Kerkar.

Also, "The value of our overseas business was not reflecting in our stock," says Kerkar about the decision to sell.

Late last year, the company set in motion the process sell the education business, and got interest globally. Baird and Axis Capital were later appointed as financial advisors.

Overall, he wants to simplify the structure of Cox & Kings, and strategically move to asset light, consumer facing business with focus on India. "The largest opportunity worldwide is in India," he said.

NBFC plans

The company, which got NBFC license in May, is set to launch its financial services arm by November-end.

"The business will be profitable from day one as we have transferred the forex business. We have strong retail presence and wholesale clients," said Kerkar.

Despite the current challenges in the NBFC space - after default by IL&FS - Kerkar is bullish and says that Cox & Kings will specialise in personal loan. "The duration of our loans will be from  six to 18 months. We are very bullish on the climate," he said.

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First Published on Oct 29, 2018 04:44 pm
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