News: Thomas Cook India plans acquisition-led growth

(RTR 22/05/2006) Mumbai - Thomas Cook India Ltd. has drawn up an acquisition-led growth plan involving retail expansion and a spreading of business risk beyond forex and travel services, the company's new managing director said.

The company expected its 2007 revenue to grow 20-30 per cent over 2006, when it would have an extended 14-month accounting period, Madhavan Menon, who took over the top job last month, told Reuters on Monday.

"We will not achieve the growth targets we are looking at just through organic growth," Menon said. "So, clearly acquisitions are the route."

Thomas Cook would also raise debt to fund acquisitions in the current business lines of the company, he said.

"We have an unleveraged balance sheet, we need to leverage our balance sheet and grow," Menon remarked.

The company, whose foreign exchange business is complemented by corporate and holiday travel business and a clutch of smaller segments such as cargo and travel insurance, would work to mitigate risk from volatility in travel and currency, he said.

"I intend to diversify my risk across three businesses rather than as it is today", he said adding the company's earnings in the February-April 2005 quarter was hit as people cancelled their travel plans after the December 2004 Indian ocean tsunami.

Thomas Cook reported revenue of Rs 131 crore and net profit of Rs 26.9 cr in the year ended October 2005.

The company derives more than half of its revenue from forex and handles $1 billion in currency each year.

"Ultimately the idea is to build robust streams across the three businesses and make sure they are dependent as well as independent."

The insurance-selling operation had seen a gross profit growth of 80-100 per cent over the last two years and the company was considering expanding in non-life insurance area, Menon said.

Thomas Cook is developing its 60 branches into uniform outlets, providing all services. All of the outlets deal in foreign exchange. 7-8 are now in the new format.

The company would add another 90 stores through organic or inorganic growth in the next three years, Menon said.

"I want to be a one-stop-shop for all the customer's travel and travel related services," he said.

Dubai Financial LLC, a subsidiary of Dubai Investment Group, acquired 60 per cent in Thomas Cook India in December and mopped up another 8 per cent through an open offer.

Thomas Cook shares fell 7.15 per cent to Rs 580.05 in a weak Mumbai market.