Thomas Cook India : Transcript of the 46th Annual General Meeting of Thomas Cook (India) Limited held on 23rd August 2023.

Transcript of the 46th Annual General Meeting of Thomas Cook (India) Limited held on 23rd August, 2023 at 3.30 pm through Video Conferencing / Other Audio Visual Means.

Mr. Madhavan Menon - Executive Chairman, Thomas Cook (India) Limited:

Ladies and gentlemen, and our shareholders, greetings from Thomas Cook (India) Limited. It is 3:30 pm and with your permission I call this meeting to order.

It is my privilege to extend to you, our shareholders, a very warm welcome to the 46th Annual General Meeting, I, Madhavan Menon, Executive Chairman of the company, with the concurrence of the board members will preside over the conduct of today's meeting. Before we commence the proceedings, I would like to introduce my colleagues on the board.

• Mr. Mahesh Iyer, Managing Director and CEO.
• Mrs. Sharmila Abhay Karve, Non-Executive Independent Director
• Mr. Sunil Mathur, Non-Executive Independent Director
• Mr. Nilesh Vikamsey, Non-Executive Independent Director
• Mr. Pravir Kumar Vohra, Non-Executive Independent Director
• Mrs. Kishori Udeshi, Non-Executive Independent Director has sought a leave of absence, as have Mr. Chandran Ratnaswami, Non-Executive Director, Mr. Gopal Soundarajan, Non- Executive Director, and Mr. Sumit Maheshwari, Non-Executive Director.
  Mr. Bhavesh Dhupelia of M/s. BSR & Co., LLP, our statutory auditor is also present.

I have been informed that we have the requisite quorum present and I declare this AGM open. With your permission I take the notice convening the meeting, the directors' report, the auditor's report and the audited financial statement as having been already circulated to you, as read. Members may note that statutory registers and documents required to be made available for members' inspection at the AGM are available for inspection through the electronic mode by members at the AGM.

I will now address the shareholders.

Dear shareholders, a very warm welcome to you on the occasion of the 46th Annual General Meeting of our company. The crisis of the pandemic represented both an opportunity and a challenge for your company. I am sure all of you have actively tracked our journey through the pandemic and our significant recovery emerging from the pandemic for the financial year '2022-2023.

I am going to take this opportunity to talk about the incredible journey that our team undertook that brought your company back from the brink. We saw results reflecting as early as Quarter 2 FY23, culminating in a record performance for the year ended March 31, 2023.

Highlights of our financial year '22-23 performance:

• Thomas Cook India delivered the highest operating profit in a decade: Operating EBITDA at Rs. 1.2 Bn for FY23; Operating PBT at Rs. 560 Mn Vs a loss of Rs. 1.14 Bn in FY22.
• At a Group level, Operating EBITDA grew significantly to Rs. 2.7 Bn for FY23 against a loss of Rs. 1.2 Bn in FY22.
• The growth drivers were your Foreign Exchange & Travel Businesses (Thomas Cook); Hospitality (Sterling Holidays).
• Sterling Holidays registered its highest EBITDA & PBT since inception: EBITDA at Rs 1.1 Bn for FY23; PBT at Rs. 659 Mn Vs Rs. 436 Mn in FY22.

Cost optimization:

As early as June 2020, with signs that the pandemic would continue unabated, we took a difficult but crucial step to right-size the organization. This was managed with sensitivity - by careful analysis of overlapping roles/ redundancies and creating common resource pools, that reduced bench strength by approx. 30%.

Additionally, your senior and mid-management took a sizable pay cut across both the India businesses & overseas subsidiaries.

After years of building infrastructure, we scaled down our physical network basis criticality & profitability, reducing outflows on lease rentals. We relocated SOTC Travel Limited (SOTC Travel / SOTC) from its earlier premises to a separate floor in the Marathon FutureX building, Lower Parel, Mumbai, where the current Thomas Cook head office is situated, thereby reducing the cost significantly.

We also terminated or paused many service agreements towards controlling cash outflows. Your Company's overall costs saw an immediate reduction by approx. 50% starting June-July 2020, which we sustained through the two-year period of the pandemic.

As we emerged from the pandemic and scaled up businesses and resultant costs, our continued focus on cost optimization delivered significant annualized savings of Rs.3.71 Bn for FY23 - a 30% reduction in costs Vs FY20 (pre-pandemic).

Restructuring of the enterprise:

• Travel services:
  To drive economies of scale by joint contracting and bulk buying we integrated the backend of our holidays business at Thomas Cook and SOTC Travel creating a consolidated product contracting operations unit. This equipped us with unique competitive advantages of operating combined group tours increasing profitability with improved margins and efficiencies. At the front end we took a strategic decision to operate as distinct entities for marketing sales and distribution. This created healthy competition between our brands while simultaneously enhancing our visibility, market share and leadership. We replicated this for our corporate travel units across Thomas Cook India and SOTC, integrating them to form a leaner consolidated backend while keeping individual customer facing teams intact, ensuring better contracting and a fungible team to be able to serve more customers.

• Foreign Exchange:

We reimagined our foreign exchange business by setting up a central team called Leap Capture to Sale with seamless handover to the closest retail outlets for last mile delivery better known as Ghar Pe Forex within 2 hours. The ease, convenience for customers coupled with speed and efficiencies of a consolidated team continues to give your company a compelling advantage. We were, you will be happy to note, the first non-bank to implement E-KYC.

• Sterling Holidays:
  Sterling Holidays also restructured its business model by pivoting away from its time share business towards its more asset light and profitable hotel business. Accordingly, the company merged the vacation ownership team with their existing network to capitalize on the strong and growing domestic demand, Sterling embarked on an aggressive expansion adding 184 rooms and 6 new resorts and is set to add a resort a month for the second half of this year.

Accelerated digital first strategy:

Your company maximized on the downtime to accelerate its digital transformation. This was done to elevate customer experience and increase productivity by reducing processing time, minimizing cost and eliminating errors. In addition to our self-booking and servicing apps, we introduced an innovative dynamic holiday bundler to help customers choose their air and land components basis their preference.

To empower its partner agent, your company developed digital tools for its holidays and foreign exchange businesses providing seamless access to our products, services and payment systems, to help partner serve their customers better. Over 1600 Forex partners have been onboarded with a business of Rs. 1000 crores generated since the launch.

For today's business traveller your company has deployed an enhanced self-booking tool for both its business travel and foreign exchange segments customized basis respective corporate requirements and policies. The high adoption of approximately 50% of the corporates highlights success of this model. The state-of-the-art vendor management system was introduced across businesses to streamline processes from procurement to settlement. For improved customer experience - our enhanced CRM integration and the common UI for sellers and customers alike significantly simplifies the user/seller experience.

Sterling One, a self-help booking platform for Sterling Holidays, partners and customers was launched to significantly enhance customer experience while expanding scaling the distribution of resort inventory and room rates.

Productivity:

As a result of the restructuring, cost optimization and digitization, your Company continues to witness significant productivity gains through each line of business.

• Holidays:
  Digitizing our processes has reduced turnaround time for customized holiday plans and booking from around 4 days to nearly 15 minutes. This has resulted in strong growth of our customized holiday segment by 55% versus pre-pandemic volumes.
• Foreign exchange:
  At a turnover level the per percent productivity has seen an increase of 77% year-on-year. The retail segment saw a 97% recovery versus pre-pandemic. Card loans grew by 172% year-on-year and 107% versus the pre-pandemic period. The overseas education segment was at a robust 162% year-on-year surpassing pre-pandemic levels by 38%. Your foreign exchange business has reiterated its leadership standing tall as the largest non-bank for Forex services provider in India, the second only to HDFC from a prepaid cards' perspective.
• Business travel:
  Business travel has increased per person productivity by 62%, and reduction in receivable in the receivable cycle to 21 days from approximately 35 days pre-pandemic.
• MICE:

Increased per person productivity by 26% growth by 711% year-on-year, recovery by 85% versus the pre-pandemic levels. The business spread over Thomas Cook and SOTC managed sizeable corporate numbers with over 600 groups between a 100 to 3000 delegates per group. Additionally, the team handled large inbound groups totalling over 6700 delegates from across 130 countries. Your company was empanelled by the government of India as an event partner for the prestigious G20 preparatory meetings and has managed 37 events across 29 cities. We have also handled over 20,000 customers for the Khelo India Games and successfully managed several pioneering government initiatives like Digital Yoga, and groundbreaking ceremony for WHO Global Centre for traditional medicines.

• Sterling:
  Sterling witnessed a 42% growth in the average room rate and a 53% growth in F&B spends year- on-year in resorts. Rapid expansion with 184 rooms added in FY23 and 6 new resorts. The per person productivity increased by a strong 59% during the pre-pandemic.
• Digital Imaging Solutions better known as DEI:
  FY23 saw the renewal of 34 existing and 28 new partnerships, operational launch of 8 key projects, a milestone was achieved with the launch of Dubai Balloon Project - DEI's first B2C attraction.

Outlook trends and our strategy:

The pandemic has accelerated some major shifts in consumer behaviour in the Indian market and let me use this opportunity to focus on four of them.

1. Shift from savers to spenders. The Indian consumer has shifted from being a saver to a spender and this changed mindset will continue to have a cascading effect on holidays. We are already seeing higher travel spending and frequency and have launched a portfolio of short breaks and attractive new holiday options. Our focus on the domestic cruise potential has seen your Company book over 8000 customers achieving top seller status with Cordelia Cruises.
2. The rise of a young India digital India: Youth power bodes well with India being the world's youngest demography with 65% of its population under 35 years of age. Our digital focus has resulted in a drop in our average consumer age by 10 years. With this segment being passionate about travel our specifically designed Gen Z tours offer experiences like sky-diving,deep sea diving, exploring local cuisine and night life and also unbeatable offers including best price guarantee at low cost EMIs.
3. The rise of regional markets: Given increased disposable incomes, connectivity due to new flights, new regional airports and highly aspirational market, your Company's network expansion into tier 2 to 4 towns and regional marketing intends to capitalize on this sizeable opportunity.
4. Demand for experiential travel: The pandemic has given rise to YOLO or better known as You Only Live Once outlook with an increased desire to tick off bucket list experiences. Our pivot to personalized programs has resulted in 50% increase in our customized holiday business compared to a pre-pandemic with accelerated demand for unique shareable experiences versus only exploring popular tourist locales and regular sightseeing tours.

Bullish about the future:

While all seems to be going well, there are some challenges ahead and that the teams are working to mitigate and manage. Visa challenges for long haul destinations like Europe and Asia have created a strong opportunity for both our domestic as well as short-haul international businesses that we have leveraged well through our portfolio of Easy-Visa holidays. We also expect that visa challenges will ease off as more consulates shore up their capabilities and start offering simpler online visa applications. Elevated airfares for both domestic and international routes are currently causing some pain for holiday planners and should also ease off steadily as more and more airline capacity is added by airlines like Air India and Indigo over the next couple of years.

Acknowledgements:

Before I end, I would like to take this opportunity to place on record my sincere gratitude to all those who have supported our eventful journey back from the brink:

First to all my colleagues in the group and their families, thank you for your support, persistence, perseverance, cooperation through the difficult times. I would also use this opportunity to congratulate Mr. Mahesh Iyer as he has been elevated to the position of Managing Director and CEO of Thomas Cook. The