Thomas Cook India today clarified that the financial troubles of its former, UK-based parent, Thomas Cook Group Plc, will have zero impact on the Indian company as the former parent has sold off its entire stake in the Indian unit seven years ago.
Thomas Cook Group, founded in 1841 in Britain, sold its 77% stake in its Indian subsidiary to Canadian insurer Fairfax for about $150 million in 2012.
Compared to the poor condition of the former parent, Thomas Cook India has surprised many market observers by not only surviving the onslaught of Internet-based travel companies, but also going from strength to strength over the last decade or so.
The Indian unit, which today has operations in 29 countries, owns nearly half of Quess Corp, a profitable firm that provides infrastructure and staffing solutions to large corporations, and a raft of other brands and businesses.
Thomas Cook India has managed to thrive in a world of online-dominated travel companies by diversifying into all kinds of adjacent businesses.
It has also used its funds well to acquire firms like SOTC Travel, timeshare holiday company Sterling Holiday Resorts, Tata Capital Forex, Tata Capital Travel Services, and earlier this year, Digiphoto Entertainment Imaging LLC.
The extremely diversified and niche nature of the company’s subsidiaries has given Thomas Cook India a surprising ability to weather long-term trends as well as cyclical downturns that have resulted in the demise of most of its competitors. Mounting debt pressures, for example, forced Raj Travels’ Chairman Lalit Sheth to commit suicide in 2012.
In a statement today, Thomas Cook India said it had cash and bank deposits of Rs 1,389 cr as of June end on a group level, and generates about Rs 250 cr of ‘free cash flow’ every year. Free cash flow refers to actual cash generated by a company, after paying for all running costs and capital expenses.
In contrast, the former parent is on the verge of a collapse in the UK after running out of cash, and is hoping for a bailout from China-based investment company Fosun International Ltd.
“We believe that it is important that we clarify for the record that Thomas Cook (India) Limited is financially strong, profitable and maintains a positive outlook in the travel and tourism sector and continues to witness strong growth,” the Indian company said today in the context of media reports about the troubles of its former parent.
“Post transfer of its entire stake in Thomas Cook (India) Limited to Fairfax, Thomas Cook UK ceased to be the promoter of Thomas Cook (India) Limited from the said date and since then, Thomas Cook UK has had no stake in Thomas Cook (India) Limited,” it added.