Earnings Call Transcript - XNSE:THOMASCOOK 2026-11-03

Operator

Ladies and gentlemen, good day and welcome to Thomas Cook India Ltd. Q2 FY27 earnings conference call hosted by 361 Capital Market. As a reminder, all participants will be in the lesson only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Purva Javan from 361 Capital Market. Thank you and over to you, ma'am.

Purva Javan, Analyst — 361 Capital Market

Thank you, you folks. Welcome, everyone, and thank you for joining us on Thomas Cook India Ltd. Q2 and H1FY27 earnings conference call. From the company, we have Mr. Mahesh Ayer, Managing Director and Chief Executive Officer, and the Senior Management Team. We would like to begin the call with brief opening remarks from the management, and following which, we will have the forum open for an interactive Q&A session. I would now like to invite Mr. Mahir Shire to make initial remarks. Thank you, and over to you, sir.

Mahesh Ayer, CEO

Thank you, Gurva. Good afternoon, everyone, and thank you for joining us as we discuss the Q2 FY27 financial and operating performance. Before we begin, I would like... Vikram Lalwani, Marjorie of DEI, Vishal Suri, Managing Director of SOTC, Devashish Nandi, who is the Group CFO for Thaumskook India Group, Mr. Brijesh Modi, who is the CFO at Thaumskook India Limited, Krishna Kumar, who is the CFO at Sterling Holiday Resorts, and Urvashi Bhutani, who heads Investor Relationships. Quarter 2 was a quarter in which we began to see recovery, with momentum improving across parts of our business, although at varying levels. The external environment continues to be uncertain, and some of our international operations are still working through the effects of the geopolitical disruptions. But the quarter also showed us where the demand is holding up, where activity is picking up, and importantly, how the cost agility we have built into our operations is helping us respond to changing business conditions. To better align cost with business volumes, manage the impact on profitability, and protect our underlying performance, even as we navigate an uneven recovery. The call's performance reflects two things. First, the strong recovery and growth in parts of our India portfolio. Second, the... Some of the key performance highlights for the quarter are consolidated total income stood at $20030 million, shows a 5% decline over the same quarter last year. Our India travel segment saw clear signs of recovery and I will detail this in a little more when I talk about the segments. We ended the quarter just 6% below last year with event margins holding a healthy 3.8%. Our international business continued to face a challenging environment, particularly given the geopolitical situation, which had a direct impact on the operations of Death and Adventures and DEI. The debit margins for the travel segment has shown an improvement on a sequential basis from 2.4% to 2.9% in Q2 of FY2027. A consolidated PBT before exception item stood at 848 million, which was broadly at the same level as last year, despite the reduction in overall income. This is particularly noteworthy given the shortfall of almost over 1036 million. Income from operations coming largely out of Descent Adventures and DEI. What is also encouraging is that we have actually managed to improve our PBT margin to 4.2% compared to 4% last year, despite the pressure on top line. And our reach with the branch network growing by 7% year-on-year via the franchisee route to 310 branches at the end of September 2026 compared to 289 branches. This is our AI-powered chatbot with the integration of Dynapack or Dynamic Inventory Customization feature. While still it is in the initial phase, this enables the bot to generate personalized travel itineraries with real-time pricing, allowing customers to explore holiday options based on their individual preferences. We have also continued to receive recognition for our efforts across our businesses. During the quarter, Samaskook India Limited's corporate travel team was recognized as the best corporate travel management company for the year at the India Travel and Technology Summit. Our Bhakti business won the Best Spiritual and Pilgrimage Tour Operator Award at the India Travel Awards, while we also received the ET MarTech Award for the use of generative AI in MarTech and were recognized as the most popular tour operator at the Milongi Awards. SOTC also had a strong showing, winning Best Travel Agency of the Year and Best Omni Travel Agency of the Year at the India Travel and Technology Summit Awards. Its MICE and Travel Team was also recognized as the MICE and Travel Team of the Year at the Mid Excellence Awards 2026. With that context, let me take you through how the individual businesses have performed during the quarter, starting with financial services. The segment has continued its upward trajectory and reported a strong revenue increase of 21% during the quarter, which is backed by a 7% increase in Gloucester number to Rs.39 billion driven by the retail segment. Our EPIT for the segment in Q2 improved by 10% to 452 million and margins are at a very healthy percentage of 44.1%. From an H1 lens, our financial services business continued to deliver healthy growth across key operating parameters. Gross turnover grew 4% YOY to Rs.72 billion, with retail turnover increasing 10% to Rs.55 billion. Revenue from operations grew 14% to Rs.1918 million, while EBIT increased 9% to Rs.856 million, with EBIT margin standing at 44.7%. The retail portfolio in the Potter grew 12% year-on-year, driven largely by the education segment, which delivered a strong... The market portfolio also recorded an improvement of 10% while the travel segment saw a decline of 6%. The performance of our education business is particularly noteworthy when viewed against the broader industry environment. RBI data for April to August 2026 shows that outward remittances under the education category declined by 34%, while travel-related foreign exchange remittances declined by 1%. Against this backdrop, our education products business grew by 33%. Thank you. And remains an important part of our proposition for this segment. Our corporate business also performed very well with turnover increasing by 10% driven by higher wallet share from existing relationships as well as new current acquisitions during the quarter. From a distribution standpoint, supporting our growth has been a continued focus on strengthening our distribution reach and digital capabilities. Digital adoption remains an important part of this strategy, helping us improve customer convenience and making forex transactions more accessible. Our digital channels kept gaining ground during the quarter with overall digital adoption increasing to 22.4% compared to 21.5% in the corresponding period last year. This was supported by strong customer engagement across our app, WhatsApp channel, which grew fourfold and 3% YOY. Alongside our digital expansion, we continue to optimize our retail footprint while strengthening Thank you. As a part of our retail network optimization during the quarter. This also positions us to tap into the growing travel demand from Tier 2 and Tier 3 markets as travel activity expands beyond larger metros. Moving on to the travel segment, Q2 brought clear signs of recovery with improving momentum across parts of our India portfolio. We are also seeing gradual improvement in some of our international businesses as they work through the impact of geopolitical disruptions. On a consolidated basis, the travel business reported a revenue of 15683 million during the quarter, a decline of 7% year-on-year. Our India travel business saw a paced recovery through July and August with momentum picking up more sharply in September 2026. We ended the quarter just 6% below last year with EBIT margins holding healthy at 3.8%. Due to the agility in our cost functions, we were able to narrow the EBIT deficit in the India business from 31% to 22%. This is encouraging, particularly given the challenges we faced on the long-haul side of our outbound business. And here also, on a sequential basis, we have been able to reduce the volume deficit by about 50%. International operations, Desert Adventures and Allied Tee Pro continue to face challenges given the ongoing political disruptions in Middle East and softer inbound tourism into But like I said, this quarter has seen some degree of improvement from the June quarter, and we have reduced our deficit in Desert Adventures from 89% to 67% now, and in the case of Allied Tee Pro, from 40% to 22%. Consequently, the total EBIT for the business stood at 455 million with a margin of 2.9%. For the first half, travel income from operations stood at 32,789 million, which is about 11% lower than last year. That said, I would like to point out that the second quarter has been encouraging. Our Q2 performance has helped us recover a good part of the ground we lost earlier in the year because of geopolitical volatility. And we have been able to narrow that gap quite efficiently, as I just mentioned. Let me now go deeper into the travel business, starting with the B2C side. Within B2C, the business recorded a decline of 17%, largely due to lower activity on the long-haul outbound segment. Geopolitical uncertainty affected flight connectivity on certain routes and pushed up airfares, impacting travel plans and booking conversions. High visa rejection rates for China. Traditionally, one of our leading destinations affected booking conversions and travel volumes, weighing on the segment. Our domestic business grew by 8% during the quarter, led by destinations such as Ladakh, Kerala, Sri Lanka, Bhutan, and the Bhakti and Darshan portfolio, especially Chardam. However, growth would have been higher but for the cancellation on some of our Kailash Mansoro Yatras following disruptions to the China visa process. Our cancellation on account of this were to the tune of 185 million. This was around 20%. I have discussed our approach towards AI integration across many layers on our business in the previous calls. is now integrated with dynamic packaging capabilities. Agent Assist is showing strong early results in an initial pilot with new agents booking up 85%, 70% on revenue, and 52% compared to Q1. Higher adoption on agent assist will keep contributing to improvements in front-line creativity. At the same time, our QC bot has significantly strengthened service quality and governance by enabling automated audits of 100% of customer calls exceeding 2 minutes compared to only 3-5% that were reviewed manually earlier. Together with Agent Assist and QCBot have translated into stronger conversion performance with conversion rates on offered calls per agent, improving from 2.15 to 3.40% post-deployment during the quarter. These initiatives reflect our continued focus on leveraging AI and automation to enhance customer experience, improving productivity, and build a scalable growth platform for the business. On the product offering side, we kept adding new offerings to our holiday portfolio for the upcoming season. We expanded our experiential offerings to improve our products. Thank you. Overall, our focus remains on building a broader and more differentiated holiday portfolio, responding to evolving customer preferences and converting the recovery in demand into sustained business growth. Looking ahead, we remain optimistic about the momentum in our leisure travel business, with forward bookings currently trending at a healthy 30% growth over last year. This is particularly encouraging. Given the elevated airfares and other input cost pressures, we are also seeing a rebound in our long-haul travel specially to Europe and Australia which is another positive indicator for the business. On the short-haul side, Japan continues to trend well after the cherry bloom season into the autumn months which is another good sign reflecting Japan's confidence as a year-round destination. Thus, the forward-looking trends give us confidence in the demand outlook for the current quarter, and we expect some of this to flow through in the last quarter of FY27, provided there are no external shocks. Coming to the B2B businesses, the India DMS business grew by 16% during what is typically a softer quarter seasonally. This was supported by steady business inflows from key source markets, including UK, Germany, Our Mike's business reported a stable performance during the quarter, with outcome largely reflecting the timing of execution of certain group engagements, and you can see the pattern in the monthly movement too. Moving on the corporate travel side, revenue grew by 11% to $446 million, and gross turnover rose 19% to Today, the business continued to see strong momentum. Air transaction volume grew 18% with India and international air volumes increasing by 23 and 15% respectively. Hotel volumes grew 81%. Also, the adoption of our online booking tool was a healthy 32%. We will expand our client base during the quarter, adding new accounts across pharmaceuticals, healthcare, auto components, fintech, and digital payments. These means strengthen our presence across a diverse range of corporate sector and support our growth ambitions. Moving to our overseas BMS business, revenue declined by 7% year-on-year, primarily due to the continued impact of geopolitical disruptions in the Middle East and softer inbound tourism in the U.S. This was partly offset by growth in Asian trades and private safaris business across Asia and Africa. In the Asia-Pacific, Asian trades grew by 9%, supported by positive performance in China, Singapore, and Thailand, although softer inflows from source markets moderated the overall growth. In the U.S., allied growth saw a 22% decline in sales amid continued weakness in international visitor arrivals. However, the extent of decline moderated compared with the previous quarter gap of 40%, which is an encouraging sign. The Middle East remained the most impacted market with decent adventures recording a 67% decline in sales as geographical uncertainty continued to weigh on the travel demand and travel confidence. However, this marked an improvement from the 89% decline we recorded in Q1 indicating a gradual recovery. We also saw early signs of improvement in September with some recovery in demand from key source market and expect the business to see a 50% recovery in the current quarter. The business has continued to focus on cost optimization and operational readiness while encouraging forward bookings provide some cautious optimism for the coming quarter. On a more positive note, our private safaris business in South and East Africa continue to perform well with South Africa growing by 31% and East Africa by 14%. This growth helped partly offset the weakness in the Middle East and US. Overall, the travel segment continues to show a positive trend while the India business Where the international operations are slowly limping back to pre-conflict levels. We enter the second half with cautious optimism and remain hopeful that there will be no major geopolitical disruption that could derail customer confidence. With that, I hand over to Vikram for his comments.

Vikram Lalwani, Other

Good afternoon, everyone. Thank you for joining us today. I'm pleased to share Sterling's performance for the second quarter and the first half of FY27. The overarching message is that Sterling's growth trajectory continues to strengthen. The scale we built over the last couple of quarters is increasingly translating into higher revenues, stronger operating metrics, and a broader platform for sustainable earnings growth. What is particularly encouraging is that this growth is not coming from just adding new properties, but also from improving the performance of our existing portfolio. Q2 FY27, let me begin with the second quarter. First, Shirley delivered its highest Q2 revenue of approximately 1 to 72 million, registering a year-on-year growth of about 17%. This is a significant milestone because, as you are aware, July to September is traditionally our weakest quarter, influenced by monsoon seasons and softer demands across several leisure and wildlife destinations. Despite these seasonal conditions, we continue to see strong underlying demand and healthy growth across our operating metrics. Q2 saw the highest ever quarterly expansion in serving history as well, with seven resorts open during a quarter to increase the portfolio to 83 properties and having crossed a key milestone of 4,000 keys as on 30th of September. The room nights sold increased by approximately 23%, while occupancy improved by about 400 basis points. Average room rates in our own lease portfolio also increased by 12% approximately. This has resulted in a total respar growth of 12%, demonstrating an improved revenue productivity. This combination of volume growth, higher occupancies, and improved pricing is particularly encouraging. It demonstrates that serving is not merely growing through the addition of new results. We are also improving our ability to attract gas, optimize pricing, and monetize our existing and growing hospitality network. For us, this is an important validation of the growth strategy we have pursued over the last couple of years. Due to profitability, understanding the reported performance. On the profitability front, EBITDA increased approximately INR 289 million compared with INR 289 million. Thank you. This GST-related cost treatment fully impacted in Q3 of the previous financial year. Consequently, from Q3 onwards, the year-on-year comparison would become more consistent. Excluding this incremental GST cost... For analytical comparison, EBITDA would have actually been approximately 329 million, representing a growth of around 90-20% over the corresponding quarter last year, compared to a reported growth of approximately 4-5%. This provides a more meaningful perspective on underlying earnings conversion of the business. Importantly, our commercial fundamentals remain Healthy through the quarter with stronger room night volumes, occupancy, and average rate growth. We therefore view the reported Q2 margin improvement in context of this GST-related cost impact rather than a change in the underlying direction or the performance of the business. We also received two significant recognitions during the quarter, fastest-growing leisure hotel chairs at today's Traveller Awards 2026 for the third consecutive time, and the Smart Tech-enabled platform of the year 2026 for Sterling 1 at the Indian Travel and Technology Summit and Awards. Coming to H-127, looking at the first half of the financial year, provides an even clearer perspective on the progress Sterling is making. For H1 F527, the revenues grew approximately 19% to INR 2971 million, EBITDA increased 15% to approximately 910 million, while BB2 grew 22% to approximately 623 million. This is particularly encouraging performance because it demonstrates that increasing our scale of our business is translating into meaningful earnings growth over longer operating periods. Operationally, the first half was equally discouraged. The room nights sold increased by approximately 24%, occupancy improved by 500 basis points, while the average room rates increased approximately 11%. This resulted in a total rev pass of H1 growing little over 15% year on year. This is the combination we have consistently worked towards. A larger operating network, stronger occupancy, better realisation, and growing profitability. It also reinforces the operating leverage remonstrated in the first quarter with Hibet and TVG grew faster than revenue. Our first-half performance validates both the direction of our growth and the underlying earnings capability of the Sterling platform. On the portfolio development and how we are evolving in the hospitality opportunity, our portfolio continues to grow during the quarter with seven new resort openings, the highest number of openings we've done in a single quarter, comprising six management contracts and one revenue share property. This is consistent with our asset-right, capital-right approach to growth, allowing us to expand our network while maintaining capital discipline. At the same time, curling is progressively broadening its presence beyond traditional leisure destinations into other travel locations, including business destinations, and destinations having a flavor of both business and leisure, apart from continuing to strengthen our leisure DNA, including spiritual, wildlife, and destination-led hospitality. Having established ourselves as a leading hospitality player, we see that this is a natural evolution towards a multi-segment, full-format hospitality company, building on our existing capabilities in distribution, revenue management, network of existing guests, channel partners, and our operations. A little bit on the financial strength, our growth continues to be supported by a strong balance sheet and a consistent track record of profitability. Sterling remains state-free, with net cash reserves of approximately $3805 billion at the end of the quarter. Importantly, we have also completed 27 consecutive profitable quarters, demonstrating the resilience of our business model across various demand cycles, seasons, and phases of expansion. This sustained profitability together, along with a strong cash position, gives us the financial flexibility. to continue investing in our network, technology, products, and people while maintaining discipline in capital allocation. Our growth has been supported by the strength of our own operations and cash generation, and we intend to maintain that financial discipline even as we scale Now, what is the outlook like? As you look ahead, we enter what are traditionally two strong quarters of the financial year. October to December benefits from the festive and the holiday season, while Jan to March typically offers another strong period for travel, leisure, mice, and wedding demand. What is particularly impressive for Sterling is that we enter this period with a materially larger hospitality network than we had a year ago. The expansion undertaken over the last couple of quarters has added new destinations, increased room capacity, strengthen our ability to address different customer segments. We expect the contribution of these additions to build. Progressively, as the properties mature, the market presents strengthens, and the commercial performance ramps up. We also expect the GST cost comparability to become more consistent from Q3 onwards. Taken together, these developments provide a favorable platform for a stronger revenue growth and earnings conversion in the second half. Our focus will remain on translating this opportunity into higher resort productivity, stronger management key contributions, improved operating profitability, and sustained cash generations. To conclude, I believe Sterling is at an important phase or important stage in its growth journey. We have built a larger and a more diverse hospitality network. We are seeing the commercial benefits of that scale through... Stronger room night growth, improved occupancy, higher average room rates apart from scaling supply. Our first half performance demonstrates that this growth is translating into increasing strength. And importantly, the expansion undertaken over the last couple of quarters again is progressively creating a platform for a next phase of earnings growth. We are entering the stronger second half with considerable momentum. Larger operating footprint, a stronger balance sheet, and confidence in the opportunity. Thank you.

Keir Salamakushman, Other

Hi. Thanks, Vikram. Good afternoon, everyone. This is Keir Salamakushman from Digi, Soda, and Tamed Imaging. Going right on the quarter two financial year 2027. As compared to quarter one financial year 2027, we had done a better job. We closed at 147 crores against 130 crores in the last quarter. Whilst on comparing to the same quarter last year, it's still about 22% down from 195 crores. That's on the top line revenue. On the EBIT margin, fortunately, we've done a much better job from a recovery perspective. We have been on a recovery quarter. So we've lost about 1.2 crores as compared to making 2.3 crores the same quarter last year. From a comparison of last quarter, from losing 15 crores, we're now at 1.2 crores. We've got all of this strongly by redirecting our management focus to the Far East markets, by maximizing the revenue at all the existing sites through events and new content. UAE itself, in spite of the... Geopolitical scenario around the place is back to about 40 to 50% of the prior year revenue. This has helped us with higher productivity. Coming to the margins and the profitability, our focus has been on strongly on workforce optimization, which has given us the maximum benefit and contributed towards better EBIT margins now. The full quarter benefit in the Middle East from a direct staff production to a flatter operation structure in other markets and support functions being streamlined through technology. We've got sizable benefit out of that. We've also, the team has done a very strong work on the cost renegotiations to better share terms, both from partners and working more aggressively on reviewing and renegotiating material and service contracts. Last but not least, our IT consolidation now, with VC being completely our primary system, we've removed all the overlapping costs on IT in this quarter, which was plaguing us in the past. All of these are going to be sustainable for the future. Uh, throwing right a little bit on VC. What we've done is we've activated post-visit sales across 45% of our portfolio in terms of the number of sites. In terms of revenue, we've implemented the post-visit sales across 35% probably of the portfolio. The good news is, within the last quarter itself, we've seen 1,200 trust transactions, which is nearly, in certain sites, about 2 to 5 percent higher on conversion as compared to the previous years of operation. We would see maximization of this when the full business comes through. We still are on the recovery mode. So that will help us better conversion and better end generation and, above all, better margins. We have the testing of the, we are also testing of WhatsApp journey to lift a pre-visit path conversion. Overall, both we maximized on our VC implementations very well across the sites where we could, although all the sites are still not at full multi. Showing some light on the existing business itself, we've had five new partnerships in the quarter signed up in Malaysia, Maudis, and Singapore and India. We renewed most of our team partnerships, over 20 partnerships were renewed during this quarter, and we have launched three new partnerships in Indonesia, China, and Maudis. Going forward, new opportunities, we've just signed up the Warner Brothers. Harry Potter exhibit in Shanghai, and we're very optimistic that that will bring us a sizable recovery on our revenue in the coming quarters. We're also anticipating partnerships with Hong Kong, Disney, and Petronas, Malaysia, which will be taken soon. Good morning, everyone. The definitely ends with a much better quarter, last quarter or the third quarter. This must be our largest quarter of the year, so we are very optimistic, barring any trading restrictions due to any other unforeseen circumstances, we stay very optimistic in our recovery.

Operator

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Chetan from Systematic Group. Please go ahead.

Chetan, Analyst — Systematics Group

Thank you for the opportunity. A few questions. Firstly, on Sterling. So, I believe that newly added resources typically take over three to four months to ramp up. With seven results added during the quarter and the portfolio continuing to expand, could you share how long does it take for a new property to achieve mature level profitability? Any color on this?

Vikram Lalwani, Other

Yeah. Hi, thanks. This is Vikram here. Very good question. Now, the way I would put it is, it also depends on the kind of property or the kind of location that you open in. For example, in this quarter, we opened about three wildlife destinations, and we opened them in September, knowing fully well that, you know, November onwards is the high demand for the safaris. So, there we could potentially get a better and a quicker ramp depending on the timing in which we open as well. So, if we, for example, open a wildlife in April, then you know that it will take six months, seven months to ramp up. Whereas, we opened it in September, it could take about two and a half months. Technically, in any given property on an average, after 90 days of the operation stabilizing and the distribution channels... Getting a complete know-how of your property with the first few guests going in and experiencing it, the real ramp will start actually from post-90 days. So I would always look at the first 90 days as the baby phase and the post-90 days then starts the actual ramp. Within a year, if you see, take for example, it completes two or three quarters of seasons. All these two or three seasons, I think that's when the cramp is complete.

Chetan, Analyst — Systematics Group

Got it. Next question is on DEI. So, we have carried out site rationalization, right, closed around 30, 32 non-profitable sites during the quarter. So, if you can highlight how many of these 230 sites we currently have are EBITDA positive, or how many more sites, say, do we plan to close down during this year?

Keir Salamakushman, Other

So, this is a cyclic process. Cutting down of EBITDA-negative sites is a cyclic process, first and foremost, and it's done in a very, very scientific manner. The intent is never to have EBITDA-negative sites on our portfolio, unless it's linked with another site which is more high-positive. If you're asking me a question, how many of them are EBITDA-negative, not more than 8 to 10 percent of our sites can be hovering around the EBITDA-negative sites. So, that is, but an accurate number I wouldn't be able to give you because it's not measured on a day-to-day basis. But, historically, we've been holding sites which will make money. Our site level, we, at one basic surface, we are always site level positive on our gross margins. Then what it attributes towards the overall cost of YBC. So, we are conscious of keeping every site at gross level margin positive.

Chetan, Analyst — Systematics Group

Got it. And just one last clarification on the travel part. So we have indicated that the India leisure forward bookings for Q3 are trending somewhere around 30% higher year on year. So is it in value terms or number of passenger bookings?

Mahesh Ayer, CEO

This is Manesh here. Our cloud booking numbers that we have quoted is a 30% value growth compared to the same quarter last year, which is O&B 25 compared to O&B 26.

Chetan, Analyst — Systematics Group

Cool. Understood. Yeah. Thank you. Thank you.

Operator

Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the question queue, please limit yourselves to two questions only. Should you have a follow-up question, please rejoin the queue. Next question is from the line of Anil Shah from Insightful Investments. Please go ahead.

Anil Shah, Analyst — Insightful Investment

The question is more on the Sterling side. a bit on that because while all the other parameters in terms of ARR, in terms of number of rooms, in terms of... All of them are in favor of much better revenue. I was just wondering if there's anything more to it, and if we could just elaborate a little more on the GST part, number one. My second question is, again, related to Sterling. Thank you.

Vikram Lalwani, Other

Okay, let me answer both those questions, and if we see, yes, in a seasonally weak quarter, and 40 million coming out in a seasonally weak quarter, it reflects a little, it reflects far more. But I've actually made this point, given the fact that last year, same time in quarter two, The government or the ruling was not where we had the ISP or the input tax credit benefit data. It's actually kicked in somewhere around 23rd of September, 2025, if I remember that date correctly. So, it actually impacted the Q3 numbers and thereafter. So, therefore, the Q2 of last year, we never had this GST, ITC cost, which actually impacted us this quarter. But if you have to actually not factor at that fact, actually our EBITDA grew closer towards 90 to 20 percent, which is in line, if not actually slightly more than that of the revenue growth that has taken place. Yes, there is inflationary cost pressures, which are continuously there, like the LPG, diesel. But we are managing those through efficiencies. In a far better manner, because the consumption then starts, because you can't decide the price, then you have to start managing the consumption. So that's how we are managing efficiency that I resolve. But having said this, this is an item which was not there last year, which is there this year. Which has impacted the overall number. But from a business perspective, it has not. Now, what is this GST input tax credit? Previously, we could take an input tax credit irrespective of the rate of rate type that was sold. Now, you cannot take the input tax credit for all the rates that are sold, 7,500 and under. And if you know, in the seasonally week quarter, you don't tend to sell more rates above 7,500, at least you go actually empty, or you go rated. So, therefore, but yet we premiumized, we still increase our average rates by 12%, closer to 6,500. So, therefore, those rates that have gone below 7,500, you cannot get that benefit of an input tax that we got. Until September 23rd of 2025, right? So that is where the comparative statement is number one. Number two, if we see, to answer your second question, if we see the trajectory of sterling in the last four to five years, and how the trajectory has really swiveled and changed, Our attempt is to continuously scale the company in terms of number of hotels, but to scale them with value so that your revenue grows and your profitability grows on a capital-right basis. At the right basis. We are yet debt-free, we have cash in the bank, we will do it prudently, and we will do it systematically. So, if you have to take the trend in the last couple of years, we expect that same trend to continue with the next two years. So, I think that's the kind of growth metrics that we are looking at.

Anil Shah, Analyst — Insightful Investment

Sir, some numbers would really help, sir. Just some ballpoint in terms of how...

Devashish Nandi, CFO

We will soon be a separately listed company, as far as part of the FY28 is concerned, and to begin that journey.

Vikram Lalwani, Other

What I've always maintained, even in my previous discussions with all of you, is that as and when we keep scaling, the healthy EBITDA margins that we will maintain, depending on the seasonality, is between 32 to 37 percent. And a good running hotel company will have its EBITDA margins in that. In that range, we will continue. Some quarters may be less, some quarters may be more, but this is the range at which we will play with. We are also scaling our number of resorts and increasing our occupancy. I would not be able to give you an exact number per se for what is going to happen a crystal ball, you know, three, four years down the line, but I can safely tell you. That's the growth momentum that we have maintained in the last three to four years. We will continue to maintain that as we keep going along. We will continue to evolve as we keep going along. As I said, even in the past, which was a vacation ownership-led company, has then swiveled towards a leisure hospitality company. We succeeded in that, and in today's statement I have made that we are now progressing towards a multi-format, multi-destination, hospitality network. I think that should give us the next momentum of growth to keep the momentum of what we had for the last three to four years.

Operator

Mr. Shah, does that answer your question? Thank you. Next question is from the line of Purva Jawa from 361 Capital Market. Please go ahead.

Purva Javan, Analyst — 361 Capital Market

Yeah, thank you for the question. So, my question is on the financial service segment. We have seen a strong growth in the sector in this segment. So, what led to this and are there any one-offs in this? And what kind of sustainable growth rate should we look for this segment going ahead?

Mahesh Ayer, CEO

Hi, this is Mahesh. Thank you for that question. I think, yes, you are right. I think you have seen a very strong growth in the current quarter, which is at 21%. And as I alluded to that in my opening remarks, this is... of the retail segment, the retail segment grows. A large part of it is coming from the education segment that grew by 33% and the corporate segment that grew by 10%. On the education side, the key drivers for that have been some of the partnerships that we have entered into with the NBFC segment, the new relationship that we have signed on the student council side of it, and the expansion of our market share in the overall student segment. We will also appreciate the fact that if you look at the The LRS data. The segment has actually fallen off, and there has been a bit of a softness in demand as far as that segment is concerned. Despite that, we managed to grow our share of the market. Your question, Han? 20% kind of a growth. Look, it's very difficult for me to kind of comment on that one. But my expectation, as you have said before, you should expect a double digital growth on this business. For some time to come, because that's the kind of trajectory we are seeing, both from a travel perspective, from a student perspective, from a corporate perspective, and I believe the business will continue to deliver double-digit growth. From a margin perspective, we already guided the market before. We are expecting the range between that 40 to 45 percent, and I think we have been consistently delivering that 45 percent limit margin on the business.

Purva Javan, Analyst — 361 Capital Market

Thank you. That's a pleasure.

Operator

Thank you. Next question is from the line of here, Gogri, from Choice Institutional Equities. Please go ahead.

Hiren Gohri, Analyst — Choice Institutional Equities

Hi, thank you so much for the opportunity. Just one question from my end. With cash and short investments of around 28 billion, how do we plan to deploy this capital across business expansion, any acquisitions that we are planning, what is the strategy here?

Devashish Nandi, CFO

No, no, I can come in. Thank you. Thank you very much. So, thanks for the question. Yes, we have a good amount of cash, but you must also admit that a good amount of that overall balance is also on account of the float that we have on the pre-bid forest cards. That's a well-known fact. Now, I'll... As far as the balance, so out of the total cash that we have, there is, obviously, we look at it on a net basis, so we have a net debt of about 116 on a gross basis, and only the balance is really available as a sort of completely free cash. Our strategy with that cache is to deploy it in, obviously, for growth of the business. One of the areas, obviously, is automation, where we have been focusing a lot. We have spent a good amount of money on AI. We are doing it very judiciously, though not throwing any money after it. We are also modernizing our applications, including the back-end SAP applications, so we are spending some money on that. We also want to keep some amount of liquidity with us, because COVID taught us that in times of uncertainty, which comes very often nowadays, is good to sit on cash, because then it helps us to tide over that uncertain period, and we do live in volatile terms. At the same time, we are also looking at, you know, we are looking at possible acquisitions which are a right fit. We don't want to go out and buy something that is completely different from what we do, but something in our line of business we are willing to look at only if it makes sense in terms of the price vis-a-vis or returns. And so we'll work on that. And if we do not find such opportunities over the next couple of years, obviously there are very many ways of returning cash to a shareholder. The fact that you're demurging sterling, which is also holding only 50 crores of cash, to the shareholders is one of the ways of rewarding the shareholder. Does that answer your question?

Hiren Gohri, Analyst — Choice Institutional Equities

Yes, it does. Thank you so much. And all the best. Thank you. Thank you. Thank you. Thank you.

Operator

Thank you. Next question is from the line of Nagaraj Si from Banyan Capital. Please go ahead.

Nagaraj Sirur, Analyst — Banyan Capital

Hi, thank you. Could you take a sense of the trajectory of recovery within the various travel segments on slide 12 of the presentation? The one forward guide you have given is that India travel bookings for the O&D quarter are up. Forward bookings are up to 30% YOY. So which of those segments would that be applicable to, and forward bookings would make up what part of that overall quarterly revenue, either for that bucket or for the travel segment of the world?

Mahesh Ayer, CEO

Nagaraj, thank you for that question. This is Mahesh again. I'd like to clarify that a little in detail. So, as I said before, the study percent Lastly, on the India outbound side of the business. It also includes the B2B holiday side, which is the As well as domestic. In fact, all the three segments within that is actually growing at a double digit, obviously slightly in different proportions in that sense. This is roughly about 51% of our overall travel segment's revenue for the respective quarter. So, since the reference is to the OND quarter, this is roughly about 51% of the portfolio. As far as the balance, 49% of the portfolio is concerned. That consists largely of our international DMS operations. Over there also, from a recovery trajectory point of view, I mentioned this in my opening remark, if you look at Q1, the shortfall was 37%, whereas in Q2, we recovered it to negative 24%. So, the recovery has been about 13% on a quarter-on-quarter comparison. But if I look at Q3, which is the quarter that we are going forward with, my belief is that this should be better than the 24% shortfall that we saw. So, overall, our expectation is that for the OMB quarter, we should see a slightly better trajectory coming out of the B2B international businesses also. Hopefully, that answers your question.

Nagaraj Sirur, Analyst — Banyan Capital

Hi, sir. Thank you. Just to follow up, 30% forward booking, I understand it's a very long-lead business, but what percentage of bookings for the following quarter are made in the prior quarter, and what percentage are usually made in the quarter itself?

Mahesh Ayer, CEO

So, again, Nagraj, the trends are slightly different for different segments within the business. So, if you look at long haul, typically the booking pipeline is anywhere like D-60. D-90 or D-120 depending on the visa complications and stuff like that. Because if it's a long-haul travel, you need to touch multiple countries, that much more time for visa processing and stuff like that. So typically that could be a D-90 or a D-60. If you look at short haul, it will be more like D-30 and domestic would be D-7 or D-15. So they have different trajectories in that.

Nagaraj Sirur, Analyst — Banyan Capital

We have an update on the de-merger process timeline and also an understanding of its P&L structure. Now, when we are replacing room nights which are occupied by members over time with free independent travelers. That's going to 79% of room nights occupied this half year. That replacement would broadly be accretive to rev bar per occupied room. Is that correct? Because you're replacing a member who's paid an upfront figure long back and an annual subscription fee with somebody who's paying 8,000, 9,000 cash per room night. So, would that broadly be correct?

Vikram Lalwani, Other

Okay, let me just, um, I'll clarify and also correct you on one aspect of it. We've not replaced the member in the sense that it's not that we're taking away the rules of the member and giving it to what we call a non-member. We are also servicing the members, right? It's just that we have stopped selling the membership or what we call membership acquisition. I think in 2023 is when I announced it. is when we stop selling that, and we will continue to service the existing base of the members that we have, and even the question of how many members, we have approximately about 65,000 to 70,000 members, and of which about, say, 35,000 cars in a year. Now, having said that, we accommodate them based on the rules of the membership. And which is why we also report what is known as a guest ratio. So that means out of every 100 rooms that are sold, in the guest ratio, assuming it's 80%, that means 80% of those 100 rooms have gone to a traditional resort sale. And the 20% is with the members. So the rest part is actually calculated, keeping that 80% in mind. And does not keep the remaining 20% in the day. The resort business, that is a room revenue, plus the F&B revenue, and plus all the other revenues, that actually is taken into account in fact as a total revenue per available room. Understood.

Nagaraj Sirur, Analyst — Banyan Capital

We have as much to speak.

Vikram Lalwani, Other

Sorry, the first question is, obviously, it is procedural right now. It is at the NCLT stage as on 2nd of November, and it's following a due process to actually come alive.

Devashish Nandi, CFO

So, maybe I can just expand on that quickly. So, we have received the... We have a permission or the approval from the NSE and the BSE, as well as the CEPI. We have filed with NCLT. We had one hearing with NCLT, so our papers are with NCLT. We are expecting them to issue us for that directive in the next few days to put the shareholders meeting, and we'll get 60 days to hold that. So that will possibly help by end of December, early January. We are on the track that we promised you, and we are expecting this entire process. March was early April.

Nagaraj Sirur, Analyst — Banyan Capital

Thank you. Just a follow-up on the earlier question on Sterling. Sir, is it fair to assume that the existing numbers will roll off over the next... Thank you.

Vikram Lalwani, Other

Okay, so let me again explain this in probably a simple illustration. If I have 10 rooms and 7 rooms are occupied, my occupancy is 70%. Now, in that 7 rooms, say 5 rooms goes to a typical resort guest. So 5 divided by 7 is actually my debt ratio. And that 5 divided by 7, it says 72%, right? So that's my debt ratio. But in this case, it's not that, and as in when you're increasing the supply, and the very fact that the member base is not increasing, and you're offering them more opportunities to experience new destinations, When compared to what it was even five years ago, you are actually not displacing, you are dispersing them. Right? So that you are able to experience new destinations and you are able to actually, you know, sell it to any other resort company or hotel company. And if you also see, for example, every, mostly hotel brands also have an loyalty program. Right? So this is akin to a loyalty program. And if you've gone and stayed, if you accumulate points and stay in a particular hotel X and burning those points, that particular room will actually, you're not going to get an error out of that room. So, you know, this is also akin to that, where, you know, you can also see this membership akin to what a loyalty program is being built, but the very fact that it will about 10 to 12 percent will be the base, as in when you keep increasing the supply, and giving them opportunities to experience more destinations. Without the number of memberships going up, we are only dispersing them and having opportunities to actually increase the occupancies beyond the 70%.

Operator

Sir, line for the current questioner got disconnected. We'll move to the next question from the line of Madhur Radi from Counter-Cyclical Investments. Please go ahead.

Madhur Rathi, Analyst — Counter-Cyclical Investments

Sir, thank you for the opportunity. Sir, I wanted to understand what is the gross spread that we make on our financial services business and how much of the income would we to the float income that we earn on this money or the...

Mahesh Ayer, CEO

Mother, hi again, Mahir. We have blended gross margins because we're looking at retail, corporate, wholesale, and different models like that. That's roughly between 1.6 to 1.8 percent. That's the kind of gross margins that we look at that business. From a float yield point of view, again, It's different class of assets where the flows are parked. Some are foreign currency deposits, some are INR deposits, and we look to optimize our earnings on that because the regulator also requires us not to keep idle funds on e-accounts. We kind of try to optimize it. I think the blended average return is close to about 7.5% to 8%.

Madhur Rathi, Analyst — Counter-Cyclical Investments

Good. So, sir, EBIT margin and business have improved from, I think, we used to be less than 40% to more than 40% right now. So, what has led to this improvement? And this business was kind of stagnant for the past eight-hour quarters, but we've seen a jump during the past two quarters. So, is this a jump more related to the FX price, the foreign exchange increase, the rates increasing, or is it that we have been able to, as you mentioned, we have been able to get market share and education segment, but the volume numbers of actual prepaid cars seem to be flatish. I'm, can you just point me out to where should I live?

Mahesh Ayer, CEO

So, Mardur, you're looking at multiple data points. I'd rather request you to go through slide number 8 of our investor deck, which kind of clearly shows the trajectory of the business. And if you look at it, the gross turnover for the business is showing a CAGR of 22% from FY22 to FY2026, He's moving from... 60 billion rupees to 133 billion rupees. And if you were to just compare it for H1 of FY26 and compare it to H1 of FY27, you will see a 4% increase. So from a gross volume point of view, the business has been growing. From a revenue perspective, to the point you said it's been struggling, and I kind of disagree with that statement, if you look at it, CAGR on that has been improving from 110 crores to 326 crores. That's a CAGR of 31% for comparative build-up FY22 to FY2026. And if you were to just compare that number for H126 and H127, the growth is 14%, reflecting from 168 growth to 191 growth. So, obviously, the health of the business has improved, and as we've been saying, we've also moved a lot of our business digital. While we are continue to invest in our physical distribution, we have also grown the business digitally, which comes with limited incremental cost. We have also built efficiencies in the business, which has actually helped improve our EBIT margins, which is also visible in the same slide, which is slide number 8, which I requested to kindly.

Madhur Rathi, Analyst — Counter-Cyclical Investments

No, sir, I was, my, I think the growth starting point was coming from, if I look at between FI24 and FI26 on a quarterly basis, we did close to 80 odd crores of revenue per quarter in this business, but that has improved closer to 100 crores in the past two quarters. So what has led to this improvement, if you can help me understand?

Mahesh Ayer, CEO

So, if you look at from a quarterly perspective, that's because this business has suffered. You know that what has happened in the offline business, which is, when I say the travel business, I mean, that impact of it also comes on foreign exchange. So, there has been a little bit of an up and down that has happened, but clearly, some of the drivers have been the focus on our retail business, which has been growing double digits for the last few quarters, and within that retail segment, our corporate and student market has been growing. And while we've seen a 33% growth in the current quarter, if you go back to my commentary and look at our previous presentations, we've spoken about how we build the portfolio around the student segment, how we build our portfolio on the corporate segment, and how we manage to increase our digital penetration. I think it's a combination of these three. which has held our retail portfolio hold good, which has affected positively not only the overall revenue, but also the margins in the business.

Madhur Rathi, Analyst — Counter-Cyclical Investments

Are we targeting student education platforms like Trizad, that might have Asian networks who are just facilitating students who are going from India to abroad to study? So are we targeting those kinds of customers? And if you can help me understand on that.

Mahesh Ayer, CEO

So from a segment, how we look at it is we have customers who are looking to, or students who are looking to go abroad. These students could directly come to a Thomas Cook. Good morning, everyone, and welcome to the call. Thank you. Study Buddy, which encompasses not only foreign exchange services, but also, you know, special ticket fairs, special baggage elements, and stuff like that. So we kind of created a proposition for the customer, which we believe is very compelling, and that's kind of driving the growth that we are seeing in this segment.

Operator

So the line for the current participant has been disconnected. Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference over to the management for their closing comments.

Mahesh Ayer, CEO

Ladies and gentlemen, I just want to reiterate what I said in my opening remark. Despite difficult operating circumstances, we delivered a steady set of numbers. Our PBT remained at 48 million for the current quarter, which I believe is a good set of numbers, given the difficult environment that we operated in, supported by a very strong performance from financial services, India Outbound, or the India-based travel services, and Sterling Holiday Resorts. The pain in our international markets remain, but we are seeing a steadfast improvement in recovery, and we remain optimistic about how... I'm Sutton.

Operator

Thank you very much, sir. On behalf of 361 Capital Market Private Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.