'With an NBFC, we will be one-stop shop for travelers,' says Cox & Kings CEO Peter Kerkar

Armed with a license to set up a Non-Banking Finance Company, Peter Kerkar - Group CEO of Cox and Kings - is looking to "transform lives". The soon-to-be launched unit will start retailing holidays and student loans.

"We are making aspiration travel affordable...That is the intrinsic purpose of making this NBFC Synergy," Kerkar  told Moneycontrol in an interview.

Apart from starting the new arm, the country's largest travel company will demerge and list its forex arm. "This will make us the one-stop shop for all travel needs," said Kerkar.

Excerpts:

Q. Now that you have got the NBFC license, what is your proposition?

A. Our proposition is simple. We are going to be in the retail lending section, particularly in the personal loan area. We will have two areas of specialisation initially. First will be holiday loans and second will be student loans.

The NBFC will work closely with the travel side on planned acquisitions. We have a network 180 centres. When people come in for holidays, we will be able to offer them attractive products.

Our drive is to create more travel nationally and internationally and if we are successful others will replicate and this will be good for airlines, hotels and everyone.

Q. How do you see these two - holiday and student loans - driving traffic?

A. We know that 80 percent of our clients like to avail of some financing.  So the products will be a synergistic extension of our service. We are focusing on a market that none has penetrated or has data on because generally people go for personal loan.

We are making aspiration travel affordable. That is the intrinsic purpose of making this NBFC synergy. People aspire to have better or longer packages. By offering them EMIs’ we can up-sell them packages.

They don’t have to use their savings. This way it becomes affordable over a period of 6, 10, 18, or 24 months.

In education, we already have an extension programme for students and give them travel solutions and debit cards.

These are specialized areas of personal lending. We have been doing client travel since 1834. We have some experience.

Q. And the forex division will add to this...

A. Yes, with the forex division coming out, we intend to have our own forex debit card also and offer it as a full service to our clients. When you come to us, you get forex, travel and funding in one spot.

Q. Will the option of EMIs lead to a behavioral change?

A. It's not about saving power but earning power. Most who travel would rather pay Rs 5,000 per month rather than paying Rs 2 lakh upfront. That is logical. This allows people to travel not once, but two-three times a year. Earlier, you would save for one big package, travel and then save up for another two years. Now you can travel more often.  We are transforming lives.

Q. How is it going to be different from a personal loan?

A. It's not that our loans are going to be cheaper. But when you interact with a travel firm, it will be different from a finance house that has multiple products. Our products will be catered to the needs.

Q. Many other companies offer student loans. How is it that Cox and Kings will be different?

A. We already cater to several thousands of students, who take our exchange packages. It's a logical extension of our services. This will be 10 percent our book. But will be important.

Q. What is the opportunity here?

A. Every year, 3.5 lakh students from India go overseas. Our outbound travel market is worth several millions, and domestic market is several hundreds of million.  Indian travelers have demonstrated that 8-12 per cent of compounded growth is possible every year. So several million of new travelers will keep coming every year... we are in a sweet spot.

With the banking sector going through a restructuring, the next five years are a great opportunity for the NBFCs.

Q. What is the timeline for the launch of the NBFC and the forex arm's demerger and listing?

A. As soon as we get the approvals. We already have the approvals from the RBI and the shareholders, and are waiting to hear from the Company Law Board.

The forex arm's is not a normal listing, as the parent company is already listed. The price discovery will be automatically done by the market.

Q. What does it mean for Cox & Kings shareholders?

We are showing to our existing investors that there is a lot of value in Cox & Kings that is not currently reflected in the market place. Over a period of next 18 months a lot of liquidity events may happen. This is one of them.

A. How about the education business?

That will be the next liquidity event, most probably an IPO.

Q. And the hotel business?

A. Hotel business is great. We will be at 15,000 beds by end of next year (from the present 9,000). We are reporting 76 percent bed occupancy and 94 percent room occupancy.  We just opened our hotel in St Petersburg, in time for the FIFA World Cup.

Q. Aren't you going?

A. (Smiles) I would love to, but I have to work for my shareholders and myself.

Q. What do these initiatives mean for the organisation?

A. Organisationally, the new company will have an independent board of directors and whoever is the prospective CEO and MD, will be on the board. I will be there as a non-executive director. It will be a professionally run company.