Anil Khandelwal, CFO, Cox and Kings says business in India has been robust and the India segment grew 15 percent in December quarter. Since India witnessed elections during the last vacation season, India business remain muted for the travel company. But Khandelwal says the story is different this year with summer vacation bookings from India showing significant traction.
He expects earnings from international business to grow 18-20 percent in next financial year. A major part of Cox and Kings revenues come from international business segment. He added that free cashflow of Rs 400-500 crore will help pare debt in the next one year
Below is the transcript of Anil Khandelwal’s interview with Sonia Shenoy & Ekta Batra on CNBC-TV18. Ekta: It is a total income rise of around 14 percent odd for the quarter. Can you just tell us how the business did this quarter in terms of your key segment as well as what the India segment look like in specific? A: If you just see the India segment it grew on a quarter by quarter basis of around 15 percent and on the nine months results we grew by around 15 percent. So India has been fairly robust in terms of the growth. Internationally the net revenues were almost flattish in terms of nine months performance but we had better earnings margin. Education and Meininger had great set of numbers; we had 20 percent growth for nine month period on education and Meininger as well. So on an overall blend basis if you just see the performance on a nine months basis we had a 15 percent increase both in terms of revenue and in terms of net EBITDA. Sonia: Going ahead because of various initaitivites taken by the new government in terms of Make in India etc, has tourism levels picked up and do you expect further traction? What could the ball park growth be in FY16? A: If you just see the last year what happened was because the elections came in the bang at the summer season so the summer holidays were slightly muted as compared to what generally the trend would be. We are seeing a significant traction in terms of summer holidays for the next financial. We have already launched summer campaigns. Seeing a good amount of traction both in terms of Europe holidays as well as US holidays and with significant traction in terms of the exotic holidays in Greece also. So overall if you just see the booking trends, I would think that we would be doing better than what we did in FY15 as far as the India business is concerned. If you see the international business, which actually is a significant portion of our revenues, we have been growing at around EBITDA of 18-20 percent and because the forward booking position of the education business and Meininger business is fairly visible, we know approximately how much we will do in next financial year. I am seeing that we will actually have an EBITDA growth of around 18-20 percent in next financial year as well.
Ekta: You net debt has been reducing for the past two quarters because of the qualified institutional placement (QIP) funds as well as the divestments of your campaign business? Where does it stand at this point how much further you are looking it to reduce it buy and if so how? A: If you see the March 31st 2014, our net debt position was at around Rs 4,200 crore. Now the net debt is around Rs 2,500 crore which is a 40 percent decline in last nine months coupled with the fact that we had free cashflows coming in from the business. Campaign division disposal we used the entire money to reduce the debt and the QIP money was also used to reduce the debt. So the debt level is 40 percent lower as compared to what were on March 31,2014. If I just take the earnings on an annual basis, we would be having around Rs 400-500 crore of free cashflow which will also be used to substantially reduce the debt going forward. So what is also happening is the increase in business, the reduction in interest, the campaigning level disposal also has helped us actually in terms of having a lower capex requirements so the free cash flow has being extremely healthy year-on-year so around Rs 400-500 crore of cashflows you can expect on an annual basis from the company.
Ekta: How much would your net debt look like or what would it be possibly in the next six months to one year? A: Six months would be relatively shorter horizon so from one year horizon we would expect the debt to come down by around Rs 400-500 crore further. So we would see a net debt position of around Rs 2,000 crore odd in a one year time horizon. Sonia: What were the forex loses that you clocked in this quarter and adjusted for that what were the margins that you delivered? A: Margins were almost the same as what, generally if you just take the forex loses and the forex loses are actually just the notional forex loses which we account because a large part of our balance sheet is actually a dollar denominated and pound denominated and various other currency denominated so that is actually not really a foreign exchange loss or gain in a real sense. You only basically have to account that as a translation loss so if I just take the translation loss out the EBITDA grew by around 15 percent as compared to corresponding period of last year. Sonia: What were the absolute margins? A: Absolute margins in terms of business to business changes. In India we have EBITDA margins of around 50 percent and internationally we would be having it around 40 percent. In the education and Meininger business 45 percent plus. So the EBITDA margins would be staying at around 40-45 percent on an overall group basis.
Ekta: Leave us with some guidance for FY16 where will the India business grow how much as well as your International leisure as well as your education business? A: We do not give guidance but I would say on a group basis, we can expect an EBITDA growth of around 15-20 percent that would be a fair assessment if I am sitting here and looking at FY16 estimates. A 15-20 percent growth is what we expect on the overall business. India obviously has a better traction as compared to what we did last year. Last year we did around 15 percent growth. We definitely would expect to do better both by seeing what is happening at least at the summer booking trends so a range of around 20 percent odd would be fair to assume for the India business growth.
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