In a chat with ET Now, Madhavan Menon, Chairman, and Managing Director, Thomas CookBSE 1.09 %, says as far as business is concerned, we have come to expect all sorts of problems that hit us on a daily basis. Edited excerpts
ET Now: You recently entered into a strategic alliance with Western Union and DCB. Walk us through the contours of this deal and what really does it mean for the company? What does it bring on the table for you?
Madhavan Menon: In the foreign exchange business, we constantly endeavour to expand the product offerings that we give the market. This was one more opportunity for us to tie up with Western Union and DCB to offer trade remittances in the SME segment which we are fairly present in as an organisation. We saw the alignment in this primarily because of a lot of these organisations already avail a foreign exchange as well as their travel requirements from us and therefore we thought this would just extend our offering to them. In terms of business, you will appreciate these initial stages where the volumes are relatively small but our expectation is that given our network as well as the reach and penetration that we have in this segment we will actually be able to grow this significantly over the next couple of years. I do not want to get into estimating what it will add to our revenue line at the moment because it is not very significant. However, I expect that this will grow as a new product offering as we have done in the past. For example, the online foreign exchange has grown year on year for us and continues to grow. So my expectation is that this will also grow.
ET Now: Let us talk about your big business which is the inbound and outbound business. I was looking at Thomas Cook international numbers and they indicated that because of problems in Europe, their business has suffered at Thomas Cook IndiaBSE 1.43 %. What has been your experience? On one side, there is currency fluctuation and on the other hand, there is Brexit. Then there is fear of terrorism in Europe. So are you feeling the heat or is it business as usual?
Madhavan Menon: As a business manager, I would always love status quo and that is what I would have thought would have happened. But in reality, we have come to expect all sorts of problems that hit us on a daily basis. So let me give you the impact — first off all Paris, Brussels, Orlando now Bangladesh does not help the outbound business, especially in Europe where we have seen some impact in terms of customers getting a little worried about their safety and rightfully so. As far as foreign exchange fluctuation is concerned, Brexit was a much talked about the event and therefore as a practice, Thomas Cook normally squares up at the end of every day. We do not carry out any speculative trades and therefore we came into that Friday totally square. We did take additional care as to how we traded on Friday but as I have always said, markets find their equilibrium very quickly and on Monday we were back to normal trading. Now I think an interesting trend from all this has been the strengthening of the rupee from its level slightly above south of 68.50 against the US dollar to its current level north of 67.5. So my expectation is that the rupee will in the near term will strengthen a little more and stabilise and that is where we would like to see the markets.
ET Now: Tell us a little bit more about the kind of M&A pipeline that you currently have, considering you have been pretty aggressive when it comes to acquisitions of late?
Then we have got Sterling Holiday ResortsBSE 2.20 % which was an organisation that went through several years of turmoil and we are now assisting Ramesh Ramanathan and the management team to nurse it back to health.
ET Now: Analysts are confident that the company is expected to achieve better earnings growth in the coming years what is your own sense on how FY17 is going to turn out for your balance sheet in particular?
Madhavan Menon: Look it depends on exactly what travel you are undertaking. If you are undertaking point to point travel or you are looking just for a hotel, yes, you could go online but there are limitations and constraints around this. For example, the minute you travel outside an LCC, there are multiple classes of bookings and those fares are not necessarily available to the person who goes online, so that is one point. Hotel bookings yes a little more advanced and I think the experience of the world have contributed to this development. Now as far as Thomas Cook is concerned, we continue to believe that as long as we sell packaged holidays — be it into groups or to individuals — where there is multicity travel as well as hotel and surfaced transportation requirements, which are fairly complicated, the traveller will take the assistance of a player like Thomas Cook. Having said that, let me also mention that we are not just looking at our bricks and mortar network to service our requirements, we are online, we sell all our domestic holidays through our online portal Thomascook.in as well as through our call centre. We also sell overseas holidays online and through the call centre. So it is not as if Thomas Cook is just purely a legacy player with the bricks and mortar network. We are building our online capability as well.