Rating Rationale
October 03, 2023 | Mumbai
Travel Corporation India Limited
Rating upgraded to 'CRISIL AA- / Stable'
 
Rating Action
Total Bank Loan Facilities RatedRs.20 Crore
Long Term RatingCRISIL AA-/Stable (Upgraded from 'CRISIL A+ / Stable')
Note: None of the Directors on CRISIL Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

CRISIL Ratings has upgraded rating on the bank loan facilities of Travel Corporation India Ltd (TCI) to ‘CRISIL AA-/Stable’ from ‘CRISIL A+/Stable’

 

The upgrade in rating reflects similar rating action by CRISIL Ratings on ratings of TCI’s parent Thomas Cook India Ltd (TCIL)

 

The ratings reflect the established market position and extensive experience of TCI’s management in the inbound travel business (catering to tourism into India) and expectations of recovery in the business post easing of pandemic related restrictions. These strengths are partially offset by susceptibility of profitability to industry competition and to any adverse macroeconomic event impacting the tourism industry.

 

The rating also takes into account the support TCI derives from its parent Thomas Cook India Ltd (TCIL; rated 'CRISIL AA-/ Stable /CRISIL A1+', part of the Thomas Cook group), India's leading integrated travel and travel related financial services company. c

 

The inbound travel business was the hardest hit during the pandemic and its recovery has been  gradual compared to the other business segments of the Thomas Cook Group. Operations have ramped up from fiscal 2023 and current fiscal and is expected to cross pre-pandemic levels by fiscal 2024.

Improvement in business activity would also result in improved cash generation and hence debt protection metrics like Net Cash accruals (NCA)/Adjusted debt and interest cover is expected to improve to over 0.3-0.5 times and 3-4 times respectively over the medium term.

Analytical Approach

CRISIL Ratings has combined the business and financial risk profiles of TCI and its wholly owned subsidiaries, SITA World Travel (Nepal) Pvt Ltd and SITA World Travel (Lanka) Pvt Ltd due to common ownership and management and strong business synergies. Joint venture company, TCI Go Vacation India Pvt Ltd, has been proportionately consolidated citing operational and financial linkages. CRISIL Ratings has also applied its parent notch-up framework factoring in the support from Thomas Cook (India) Ltd, which holds 100% in TCIL. Preference share (OCRPS) are treated as equity, as it is expected to remain within the company till 2037.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers & Detailed Description

Strengths:

* Strong operational, managerial, and financial support from the Thomas Cook group
TCI is the sole company catering to the entire Indian inbound travel business for the Thomas Cook group and hence remains strategically important to the group. Under normal circumstances, profitability of TCI’s business is higher than other businesses of the group. TCI's treasury is closely integrated and managed by TCIL. Apart from regular funding support for acquisition through TCI, TCIL has also provided Letter of Comfort for TCI's debt. TCI regularly receives management support from TCIL. Also, sharing of common backend operations, office space, and joint vendor negotiations benefits TCI's profitability. Thus, CRISIL Ratings believes TCI will continue to play a central role in the Thomas Cook group's growth strategy in travel space and thus continue to benefit from the strong support from its parent.

* Established market position management in inbound travel business
Post consolidation of entire inbound travel business into TCI in 2019 , the company has access to brands SITA and Distant Frontiers apart from TCI brand. The company is a market leader in inbound travel space in India, and also has leading position in most of its key source markets. TCI's management has vast experience in travel business.

 

Weaknesses

* Weak, albeit improving financial risk profile
Cash losses in fiscals 2021 and 2022 resulted in negative net worth in fiscal 2022. However, the company has minimal reliance on debt and support from Thomas Cook Group is expected as and when required.

Debt protection metrics are also expected to improve with gradual recovery in business, and interest coverage and net cash accrual to total debt ratios of over 0.3-0.5 times and 3-4 times, respectively, over the medium term.

 

* Susceptibility to geo-political risks and competition

The global travel industry was severely impacted from January 2020 till fiscal 2022 on account of reduced international travel amidst the pandemic. Onset of new variants of the Covid-19 virus resulted in further waves of the pandemic. Travel sector also remains vulnerable to geo-political risks that impact travel and could affect the performance of business. Escalations of Canada-India geo-political tensions could partly derail holiday and student travel in the third quarter of fiscal 2024 impacting passenger traffic. Therefore, it would remain a key monitorable

 

The company’s competitive position may improve over the medium term due to more severe impact of the pandemic on weaker players. However, competition from organised and unorganised players, including online ones, along with slowdown in the travel segment globally, may continue to constrain pricing power and profitability.

Liquidity: Strong

Liquidity remains adequate, supported by unutilized working capital limits of Rs. 12 crores and cash and equivalent of Rs 26 crore and no outstanding long-term debt as on March 31, 2023. Furthermore, need-based support from the parent will continue to support liquidity.

Outlook Stable

The outlook is based on the rating outlook of CRISIL Ratings on the debt instruments and bank facilities of TCIL

Rating Sensitivity factors

Upward factors:

 

Downward factors:

  • Slower-than-expected recovery in operations with revenues below Rs. 300 crores
  • Further deterioration in financial risk profile with sustained cash losses and increased reliance on external debt
  • Weakening in the credit risk profile of the parent, resulting in a downgrade in its rating by 1 or more notches

About the Company

TCI, incorporated in 1961, is a wholly owned subsidiary of TCIL. It was acquired by TCIL in December 2006 for Rs 182.5 crore and is India's premier destination management company. This is a B2B business, wherein TCI ties up with local tour operators of a particular region/country for inbound tourism into India. TCI focuses on leisure groups, individual travelers, special interest groups, charters, and cruises.

 
Post-acquisition of Kuoni's India operations (SOTC Travel Services Ltd [SOTC]) and to consolidate the group's inbound business, SOTC's outbound business division was transferred to SOTC Travel Ltd, and the inbound business merged with TCI.

 
On April 23, 2018, the company's board had approved the Composite Scheme of Arrangement and Amalgamation, which provides for demerger of the non-inbound business of TCI into TCIL while TCI will continue with only inbound business, consisting of the business of handling inward foreign tourist activity. The scheme was completed in 25th November 2019.

About the Group

TCIL is a leading integrated travel and travel-related financial services company in India, offering a broad spectrum of facilities including forex, corporate travel, leisure travel, and visa and passport services.

Key Financial Indicators

As on / for the period ended March 31

 

2023

2022

Revenue

Rs crore

227

19

Profit after tax

Rs crore

(22)

(40)

PAT margin

%

(9.6)

(213.9)

Adjusted debt/adjusted networth

Times

(1.41)

(2.53)

Interest coverage

Times

(1.33)

(9.88)

 

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

CRISIL Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the CRISIL Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN

Name of instrument

Date of allotment

Coupon rate (%)

Maturity date

Issue size

(Rs crore)

Complexity levels

Rating assigned

with outlook

NA

Proposed Working Capital Facility

NA

NA

NA

9

NA

CRISIL AA-/Stable

NA

Overdraft Facility

NA

NA

NA

10

NA

CRISIL AA-/Stable

NA

Overdraft Facility

NA

NA

NA

1

NA

CRISIL AA-/Stable

Annexure – List of entities consolidated

Name of entities consolidated

Extent of consolidation

Rationale for consolidation

SITA World Travel (Nepal) Pvt Ltd

Full consolidation

Subsidiary

SITA World Travel (Lanka) Pvt Ltd

Full consolidation

Subsidiary

TCI Go Vacation India Pvt Ltd

Moderate consolidation

Joint Venture
Annexure - Rating History for last 3 Years
  Current 2023 (History) 2022  2021  2020  Start of 2020
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 20.0 CRISIL AA-/Stable 27-01-23 CRISIL A+/Stable 09-06-22 CRISIL A+/Negative   -- 27-03-20 Withdrawn CRISIL AA-/Stable
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Overdraft Facility 10 Kotak Mahindra Bank Limited CRISIL AA-/Stable
Overdraft Facility 1 ICICI Bank Limited CRISIL AA-/Stable
Proposed Working Capital Facility 9 Not Applicable CRISIL AA-/Stable
Criteria Details
Links to related criteria
CRISILs Approach to Financial Ratios
Rating criteria for manufaturing and service sector companies
CRISILs Bank Loan Ratings - process, scale and default recognition
CRISILs Criteria for Consolidation
Criteria for Notching up Stand Alone Ratings of Companies based on Parent Support

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