In a move that could transform Cox and Kings Ltd's tour business in India and also the way subjects like history and geography are taught in the country's schools, the travel company is set to introduce education tours in India.
The move, part of the company's plans to integrate its European business model with the domestic market, comes over a year after Cox and Kings acquired the UK-based Holidaybreak Plc for about Rs 2,300 crore. Peter Kerkar, executive director of Cox and Kings, confirmed the move but ruled out large-scale acquisitions for now.
Cox and Kings' business is spread across India, Europe, the US, Australia and Japan. The Indian business contributes 25-30 per cent of consolidated revenue. While in India the company earns 76 per cent of its revenue from leisure and meeting-incentive tours, the balance comes from inbound tourism, corporate business and foreign exchange.
Apart from diversifying its tour products, the plan would help the company's European business, which is seasonal in nature. Education tours and camping tours make up 60 per cent of the company's consolidated revenue, but the student tours and camping sites in Europe close during October-February. As a consequence, the period from April to September generates profit for the foreign business, but the following months are loss-making.
"Education tours would be rolled out in India next year and the company is developing a site within the country for its education tours," Kerkar told Business Standard. This will include both residential and leisure facilities and will follow strict European standards on health and safety.
Kerkar, however, refused to outline the investment plan, but said the company expected 25 per cent return on capital invested in developing this new business segment in India. Student tours cater to children under the age of 12 and activities include guided tours to historical monuments or science parks.
Within Europe, education tours are an integral part of the curriculum and students take these trips and write reports at the end of tours. In India, such tours are not part of the education policy, but nonetheless Kerkar remains confident: "Our strategy is to become education tour specialists. We have done market studies and have held discussions with 300 schools.''
In the current year, Kerkar is hoping for 25 per cent growth in revenue and 12-18 per cent rise in Ebitda (earning before interest, tax, depreciation and amortisation) in its Indian operations.
"Our Kashmir and Himachal tours have done well. We have franchisees in 77 cities and expect 80 per cent of revenue to come from tier II-III cities.''
Cox and Kings had raised equivalent of Rs 1,400 crore in dollar debt to finance the Holidaybreak deal, whose interest costs have gone up sharply 700 times after the takeover. In August, Citi Venture Capital International invested about Rs 750 crore in Prometheon Holdings, the company's UK arm, which acquired Holidaybreak. The deal gives Cox and Kings comfort as it has managed to reduce its debt from $730 million to $600 million. "We have fairly comfortable debt-equity ratio and it has reduced from 2.8 to 2.2 after the deal with Citi," Kerkar said.