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Edited Transcript of THOMASCOOK.NSE earnings conference call or presentation 3-Feb-20 5:00am GMT

Q3 2020 Thomas Cook (India) Ltd Earnings Call

Mumbai Feb 7, 2020 (Thomson StreetEvents) -- Edited Transcript of Thomas Cook (India) Ltd earnings conference call or presentation Monday, February 3, 2020 at 5:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Debasis Nandy

Thomas Cook (India) Limited - Group CFO for Thomas Cook Group

* Madhavan Karunakaran Menon

Thomas Cook (India) Limited - Chairman, MD & Executive Director - Foreign Exchange

* Mahesh Iyer

Thomas Cook (India) Limited - CEO & Executive Director

* Ramesh Ramanathan

Sterling Holiday Resorts (India) Limited - Chairman & MD

* Vishal Suri

SOTC Travel Service Pvt. Ltd. - MD and Director

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Conference Call Participants

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* Abhijit R. Akella

IIFL Research - VP

* Claire Barnes

Apollo Investment Management Ltd. - Founder and Portfolio Manager

* Manoj Bahety

Carnelian Asset Management LLP - Co-Founder

* Milind Karmarkar;Dalal & Broacha Stock Broking Pvt Ltd.;Fund Manager

* Nihal Jham;Edelweiss Securities;Equity Research Analyst

* V.P. Rajesh;Banyan Capital Advisors LLP;Managing Partner & Portfolio Manager

* Venkat Samala;Tata Mutual Fund;Equity Research Management Trainee

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Presentation

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Abhijit R. Akella, IIFL Research - VP [1]

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Ladies and gentlemen, good morning, and thank you for joining us on the 3Q FY '20 Post-Results Conference Call of Thomas Cook India Limited. It's my pleasure to introduce the senior management team of the Thomas Cook Group, who are here with us to discuss the results.

We'll begin the call with opening remarks by Mr. Madhavan Menon, Chairman and Managing Director, followed by the management team. And thereafter, we'll open up the call for a Q&A session.

I'd now like to hand the call over to Mr. Menon to take it forward. Thank you, and over to you, sir.

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Madhavan Karunakaran Menon, Thomas Cook (India) Limited - Chairman, MD & Executive Director - Foreign Exchange [2]

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Thank you, Abhijit. Good morning, ladies and gentlemen. I must thank all of you for even taking the time out to participate in today's call despite -- I'm sure the various distractions that each one of you has around Saturday's budget.

Let me for -- use today's call to focus on the performance for quarter 3 '19/'20.

In terms of performance, I think this is -- this is a quarter where we are quite satisfied with the way we've performed.

If I go straight down to the numbers, the consolidated revenues grew by 11% to INR 17.2 billion. And if I go straight down to the EBIT number, you will notice that our EBIT grew by 10.25% to INR 434.7 million. Now this is, by any means, a good performance.

If you look at the -- from a qualitative point of view, I believe that the major businesses that is Foreign Exchange, the Inbound Business, Corporate Travel and MICE at a consolidated level did extremely well. And have not only surpassed last year's numbers but have also achieved our own internal -- have exceeded our own internal targets.

Now in terms of the other metric that we measure very closely internally is the cash balances, the cash in the form of bank deposits and other investments which is at INR 14,137 million as of December 31. And this has generated in excess of our average free cash generation of approximately INR 2 billion.

Having said that, I would -- that we have seen, as all of you know, over the last 3 quarters, faced a lot of headwinds, and therefore, I believe that we have actually managed to sustain the business through all these headwinds.

I do not believe that the headwinds have gone away. All the news reports around the coronavirus do represent some form of a threat to our business. Too early to tell. But from what little reports I'm getting in from our various businesses across Southeast Asia, there is an impact, and we will have to wait and see.

With that, I will hand over to Mahesh Iyer for his comments.

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Mahesh Iyer, Thomas Cook (India) Limited - CEO & Executive Director [3]

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Good morning, everyone. Just adding to what Madhavan said, getting into some of the specifics around the businesses. To move on first to the financial services, I think we've had a very good quarter on the financial services side. Our revenue from operations in the financial services side grew by about 13% from INR 625 million to INR 710 million. And consequently, the EBIT on the financial services side moved dramatically from INR 145 million to INR 207 million. This performance is the backdrop of a very strong growth on the retail side where we saw over 14% growth in our top line sales for the retail side. The B2B side of the business which is corporate and wholesale also came out with very impressive numbers registering a double-digit growth close to about 10%. And The Borderless Prepaid Card, one of the fledgling segments that we have actually witnessed over 42% (sic) [47%] growth registering a total volume of $133 million for the quarter.

So if I add the cumulative effect of that is what is visible in the EBIT numbers for the foreign exchange segment.

Getting to the travel and travel-related segments. As Madhavan said, we had a mixed bag, the B2B side of the business which is corporate and MICE performed very well. The B2C side which is more the holidays on the international and domestic side was a little subdued as you will appreciate that there was this slowness in the economy, the challenges that we spoke about with in terms of the Thomas Cook U.K. shutting down, the C&K closing down, the impact of the negative sentiment in the market. All of that played a little on that side of the business. But despite that, our top line sales on the holiday side grew about 8%, albeit our profitability was a little strained.

On the Inbound side, we'll explain a bit more because while you look at the revenue, they represent a flat trajectory. As far as the EBIT on the travel side is concerned, it looks like a degrowth of 36% but we'll explain that and I will leave that for Debasis to explain as to what that impact is. It's more of an accounting impact than anything else. But we will explain that in the subsequent conversations.

But overall, as we've said, for Q3, we are pleased with the performance, both from our Foreign Exchange and the B2B side on the travel which includes Inbound, MICE and Corporate Travel. And I'm happy to take further questions on that when we go along.

Over to you, Debasis.

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [4]

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Thank you, Mahesh. So I'll quickly run through the quarter and the YTD 9 months numbers.

So as you know, revenue from operations went up from INR 15.5 billion to INR 17.2 billion, which is 11 -- which is about 11% increase.

At the EBITDA level, this translated to 43% increase in EBITDA from INR 558 million to INR 801 million. And the EBITDA margins at overall level showed an improvement from 3.6% to 4.6%, largely because of the mix.

In terms of EBIT, we moved the EBIT up by over 10% from INR 394 million to INR 434 million at obviously some interest. The interest and the finance cost were increased largely because of the Ind AS impact where a part of the rentals is now being shown as the interest and finance cost. That's about INR 4.5 crores -- INR 4.5 crores of interest can be attributed to that.

And so at a net PBT level, the figure of INR 216 million last year came down to INR 181 million (sic) [INR 182 million] this year.

In terms of YTD. On a YTD basis, the revenue has grown by about 9.6% from INR 52 billion to -- INR 52.4 billion to INR 57.4 billion.

EBITDA has improved by 34% [stretched] from INR 177.5 million to INR 238 -- INR 177 crores to INR 238 crores.

At a PBT level, because of -- at a PBT level, the number went down from INR 75.5 crores to INR 55.3 crores.

As you know, this has been a very tough and challenging year for the travel business. And we have been able to -- we have been able to hold on to our course in spite of having severe disruptions in the travel industry.

In terms of the -- Mahesh has already talked about the quarter segment revenues so I'll not detail on that anymore and we can take questions on that. But for the 9 months, financial services grew its revenue by 9% which is an extremely good performance, one of the best years that we have been having in the financial services business so far.

On the travel side, it's been relatively flat. We just saw a 1% improvement in revenue.

On vacation ownership, we saw about 8% increase. And of course, we also -- this is the first year for Digiphoto Imaging Services. So that -- they are up -- its 9 months is at INR 426 crores.

straight-line Again, financial services which is Forex, Foreign Exchange, performed brilliantly. It did about -- it's an increase over 30% over last year. And with improvement in the EBIT margins from 30% last year to 35.9% which is extremely significant.

Travel. Margins actually degrew from 3.5% to 2.7%. But there is an element of -- there is element of accounting in that which I'll try and explain quickly.

So on the Inbound side. And you know that this quarter, the -- is the season for the Inbound business. This is also the quarter where we are -- we demerged our HR business which includes the shares of Quess. So during this demerger and during this demerger, the other thing that also happened is that we merged TCI which houses the Inbound Business into Thomas Cook.

As a result, there are some disruptions in the business processes. The business could not carry out this invoice, while the business went on in terms of servicing -- getting customers and servicing them, it could not raise invoices on time. There has been some delay during the month -- especially during the month of December and some disruptions on payment to suppliers, et cetera, as well.

During -- this is all getting corrected in the month of January. So there is a bit of timing difference that will happen. And you will see the impact of -- a positive impact of that. While you see the negative impact in this quarter, the positive impact will flow back in the Jan-March quarter.

And for the full financial year, you will see the -- you'll see Inbound Business performing at its full potential.

I think that's about it from my side. I would now like to hand over to Ramesh Ramanathan and he will talk to you about Sterling. Ramesh, over to you.

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Ramesh Ramanathan, Sterling Holiday Resorts (India) Limited - Chairman & MD [5]

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Thanks, Debasis, and good morning, everyone. I'm going to be talking about the quarter, the year-to-date 9 months as well as a significant development in the vacation ownership business.

The [first] quarter. During the quarter, our total income of Sterling rose from INR 675 million (sic) [INR 697 million] last year to around INR 742 million (sic) [INR 753 million] this year, a growth of around 10%.

For the second quarter running, we have had an increase in membership sales. So the membership sales -- and this is at the total value which was at 21 -- INR 218 million last year, is now at INR 333 million, a growth of almost 53%. So for the -- even in terms of units, because the membership sales is now because of, as you are aware, Ind AS 115 impact came in from last year. So we can take only 4% revenue in the top line and the balance goes and sits in deferred income.

What is relevant is the -- the quantum. So even that has gone up from 752 units to 930 units during the quarter. We continue to open more resorts under the management contract scheme which means at 0 CapEx. So we opened 1 during the quarter, 2 more are on the annual during this quarter.

In terms of occupancy during the quarter, it went up by -- went up to 65% from 63% of the comparable quarter last year. ARRs have been soft for the last 2 quarters. One last time due to disruptions on the rain, and therefore, people canceling. And this time, because of the CAA protest, there were lot of cancellations in the north and east. And this happened in December. However, we have maintained the ARR, the ARR is roughly at the same level as last year.

As regards to EBITDA, we are at INR 27 million for the current quarter against negative INR 21 million for the same quarter last year.

Now in terms of the 9 months performance, total income is at INR 1,913 million -- INR 2,092 million versus INR 1,913 million, a 9% growth, same as in the quarter. Again, the number of membership units has grown by 18.5% to 2,636 units and occupancy is at 66% for -- cumulatively for the year. ARR has also grown marginally for the year to INR 4,519 against INR 4,452 last year.

As far as the EBITDA is concerned. For the 9 months, we are at a negative of INR 5.2 crores as against INR 17.7 crores negative last year. That has improved.

I want to make a point here that in the last 2 quarters with increase in the membership sales under Ind AS 115, the more we sell, the more negative it sort of becomes, in the sense, we book all our expenses, as you know, all the fixed expenses are booked upfront whereas on the revenue front, we recognize only 4%.

Now this is where I want to talk about the development. As of January 1, we have a majority of the...

(technical difficulty)

So all the sales efforts in membership have been franchised completely into sales and marketing franchises.

What this does is it allows us to straight-line expenses as per Ind AS 115. You're all aware that the sales and marketing costs of membership is around 30-odd percent. Now hitherto, that is till December 31, we had booked all these costs upfront during the quarter whereas from January onwards, we will be able to straight-line these expenses. And what happens, as an experiment we applied whatever principles of this arrangement into the previous quarter which is the quarter which we are discussing now. Just as a ready-and-rough estimate and the quarter, the EBITDA turns out positive. The membership EBITDA which otherwise was at a negative of INR 34 million becomes a positive of INR 37 million because we are able to straight-line expenses.

What this means is that from now onwards we'll have 4% of revenue recognized, the balance going to -- sitting in deferred income. Similarly, in terms of part of the expenses, now these expenses don't cover things like office rentals and so on but it covers the entire sales structure, the sales executives, the telemarketing executives, their salaries, travel, the whole lot. And that translates -- the whole thing can now -- will go and sit as part of it will get booked upfront. That is again equivalent of 4% and the balance will go and sit as deferred expense. So the net effect is that we are looking towards the membership accounting not dragging us down, and therefore, the results looking far more positive from the current quarter onwards.

That's all from me. Thank you.

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Unidentified Company Representative, [6]

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We can open the floor for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Manoj Bahety from Carnelian Capital Advisors.

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Manoj Bahety, Carnelian Asset Management LLP - Co-Founder [2]

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I have couple of questions. First one is like if you can give the impact of like the recent unfortunate event of coronavirus, like -- it's basically like how do you see, like the coming quarter, are you seeing good amount of cancellation happening on an account of the...

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Madhavan Karunakaran Menon, Thomas Cook (India) Limited - Chairman, MD & Executive Director - Foreign Exchange [3]

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Okay. If I can just answer your questions. You have a couple of questions. Let me answer this immediately. Look, I think it's too early to tell what the impact is. The only impact that we have right now is that we have a inbound business into China which is a relatively small business that falls under Asian trails, it has been impacted. All the -- there are no visitors into China at the moment given the current situation. In terms of the other business that is sort of associated with China is our Hong Kong outbound business. And you will note that in the last quarter, they actually did well. Their bookings on the outbound side for the Chinese New Year was strong. So those were not affected. And in reality, there is no impact of the coronavirus in terms of travel of citizens of Hong Kong at the current time. So it's early days. We will have to see. Our expectation is that we will see some slowdown in the business into China. There is a slowdown of business out of China. But fortunately, none of our other subsidiaries are dependent on Chinese traffic for their profitability. So to that extent, we have a limited impact. But it's early days because I expect that people will now start questioning the impact of coronavirus to any destination that they go to. That's a question that we will all ask ourselves. But early days.

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Operator [4]

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The line for the current participant got disconnected. We'll move to the next question. The next question is from the line of Venkat Samala from Tata Asset Management.

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Venkat Samala;Tata Mutual Fund;Equity Research Management Trainee, [5]

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So I have 2, 3 questions. So the first one is there was a recent development in the recent budget. So -- wherein the packages from the foreign tour operators were to be taxed at 5% TDS. So just wanted to know how much impact that would be having on you? Or if at all, you will be affected by that? Second thing is, I just wanted to understand how the average ticket size per package and the average duration of package is getting changed, in the say, the last one year or so? And if you can throw some color as to the initiatives that you might be taking to mitigate the impact of the coronavirus from your end, whatever can be done?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [6]

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Okay. This is Debasis here. I'll try and answer some of the points that you have raised. The first question is on the 5% TCS that's been imposed in the current budget.

On all remittances relating to travel. It's actually on travel and as well as for its remittances. This is in the nature, this -- it's a tax collected at source. And effectively, the traveler or the person who is making the payment will get credit for this tax payment while filing his tax returns. So it's more of a cash flow issue. It's not a cost issue. Because you pay instead of, say, for example, INR 100, you'll pay INR 105 to begin with. But the INR 5 credit, you will get back while filing your tax returns. And one -- obviously, one assumes that somebody who is buying a foreign tour package, would also be paying taxes. So if you look at it that way, we don't see -- don't see too much of impact on that. However, it's too early because this measure, as you know, came out only on Saturday and today is just the first working day after that. So we'll have to see. Obviously, we have to also educate customers as to how this effectively doesn't impact their life at the end of the day. But we'll have to sort of watch and see how things are.

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Venkat Samala;Tata Mutual Fund;Equity Research Management Trainee, [7]

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So are you sure that for all the -- that for all the customers, the TCS will be reimbursed?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [8]

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It's not a reimbursement; it's an adjustment from their final taxable tax payments. Okay. So that's -- that TCS in principle is that. And TCS is not something new to the Indian market. It's been there for a while. And TCS is always adjusted. It's effectively another form of TDS. It's just that we collect it and pay it to the government.

Your second question was about how the duration of packages is changing over a period of last one year or so. So we covered this in our, I think, in our last analyst call also we talked about this. While -- what we have seen this year is a shift from a long duration packages, like instead of a 2-week or 14-day package or a 12-day package, people are opting for shorter duration, which is 9, 10-day packages. So especially for -- this is primarily for Europe, U.S., that sort of destinations. So we have not seen number of customers going down, number of passengers going down substantially. But what we have seen is that there is the change in duration. But also at the same time, I must tell you, increasingly what you also see passengers doing is or customers doing is taking 2 holidays in a year instead of just one. So in the end, you should -- at the end of it, it should all square up.

Your I think third question was on the coronavirus. And I think it's a little too early as Madhavan covered in the first answer. It's probably a little too early to gauge the impact of that. As you pointed out, there is a limited impact in some of our subsidiaries which are very -- really, very, very small. But we'll -- we're sort of adopting a policy of wait and watch to see whether this spreads. As long as it stays contained in China, it is something, but does it go beyond China, then it becomes something else altogether.

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Operator [9]

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The next question is from the line of Milind Karmarkar from D&B Portfolio Managers.

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Milind Karmarkar;Dalal & Broacha Stock Broking Pvt Ltd.;Fund Manager, [10]

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This question is regarding Sterling. I just wanted to know that PAT after exceptional items for 9 months FY '20 seems to be minus INR 408.85 million. So if you could explain what are the exceptional items which are included there?

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Ramesh Ramanathan, Sterling Holiday Resorts (India) Limited - Chairman & MD [11]

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No. There are no exceptional items there. What has happened is the maximum impact, we are in a situation where the more we sell off memberships, the more negative the PAT becomes. The simple reason, the revenue is only 4%, whereas the cost is all loaded upfront. And that is (inaudible) there are no other exceptional items (inaudible).

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Milind Karmarkar;Dalal & Broacha Stock Broking Pvt Ltd.;Fund Manager, [12]

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Sir, that will change from next quarter. That's what you are saying because now that it has been franchised. So will that change from next quarter?

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Ramesh Ramanathan, Sterling Holiday Resorts (India) Limited - Chairman & MD [13]

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We are expecting it to. It'll have a very great impact because, for example, if -- let's say, the value was INR 100 earlier of 1 unit and we booked INR 4 in terms of revenue. We are booking almost INR 30 in terms of expenses upfront. Now that INR 30 will get divided by 25 years. So we will be booking only INR 1.2-something. And the other half of our business which are our resort operations are profitable. So overall we expect it to be profitable as we go.

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Operator [14]

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The next question is from the line of Claire Barnes from Apollo Investment Managers.

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Claire Barnes, Apollo Investment Management Ltd. - Founder and Portfolio Manager [15]

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Could you please comment on the 45% increase in finance costs which now seem to be running at over INR 1 billion a year?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [16]

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Yes. Claire, is that the only question or you have something else?

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Claire Barnes, Apollo Investment Management Ltd. - Founder and Portfolio Manager [17]

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That's the main one for now.

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [18]

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Yes. Okay. So on the quarter numbers, if I sort of do a deep dive on the interest cost, interest and finance charges and do a like-for-like comparison, you'll see that the operating interest, actual interest cost has moved up from INR 61 million last year to INR 77 million this year. And I'll come to the reasons of that separately. The other finance charges which are primarily bank charges, credit card charges, cash management charges, have moved up from INR 116 million last year to INR 129 million this year. And there is a new element which has come in which is the interest on lease liabilities. Now this is INR 47 million. Now this is -- coming out of the new accounting standard Ind AS 116 which came into effect from 1st of April of 2019 and which basically reclassified the lease rental payments into 2 parts, it's into the depreciation and interest. Now that interest comes and sits here. There is no -- this was not there, obviously this was not there in the last financial year. And that's why the numbers are disparate. As far as the interest cost, I also -- we also (inaudible) the interest costs going up from INR 61 million to INR 77 million. And that's primarily operating interest in -- operating a large part of that, out of that INR 16 million, the major part of that, about INR 12 million out of that is on account of the new subsidiary that we have which is DEI, the one that we acquired on 30th of March. And INR 4 million is -- the balance is in the other subsidiary which is not a big number anyway. Does it explain things?

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Claire Barnes, Apollo Investment Management Ltd. - Founder and Portfolio Manager [19]

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Sorry, I didn't quite catch. So what is the overall breakdown of the debt?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [20]

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You asked for the interest breakdown?

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Claire Barnes, Apollo Investment Management Ltd. - Founder and Portfolio Manager [21]

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Sure.

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [22]

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Or the debt breakdown?

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Claire Barnes, Apollo Investment Management Ltd. - Founder and Portfolio Manager [23]

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But you have said in the past that -- my past understanding was that most of the debt was at Quess. And you've said in the past that you have no debt at parent level?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [24]

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No. I don't think that understanding is correct here. Let me clarify this one. Quess as we have moved out of -- Quess has moved out of our accounts for the last 2 years or so. So the debt that we see on our balance sheet-- first of all, at a net debt level, we are negative debt because the cash and bank balances exceed the debt. At a stand-alone level there is no debt. However, there is debt -- debt in the subsidiaries. And the interest cost is on account of those subsidiaries, largely. Now each unit is -- each unit has its own working capital requirements and therefore has working capital loans. And that's where the loans are coming from. Maybe Claire, in the interest of time, we can have a separate conversation, we can set it up and then I can take you through the debt profile, et cetera. And then you'll probably get a little more clarity on this.

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Claire Barnes, Apollo Investment Management Ltd. - Founder and Portfolio Manager [25]

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Okay. But total debt at September was INR 3.2 billion.

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [26]

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Okay.

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Claire Barnes, Apollo Investment Management Ltd. - Founder and Portfolio Manager [27]

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Total debt net of -- there was more cash than that. But anyway, total debt INR 3.2 billion and you're paying interest of over INR 1 billion. So -- so is the debt...

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [28]

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(inaudible) at the consolidation -- consolidated level. Now the cash does not -- if is the cash is fixed in some of the units, like the stand-alone Thomas Cook, now...

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Claire Barnes, Apollo Investment Management Ltd. - Founder and Portfolio Manager [29]

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But I mean, okay, debt of INR 3.2 billion and interest of INR 1 billion is an interest rate of 30% unless the debt levels are artificially low at the end of the quarter?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [30]

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No, no, no. Sorry, sorry. I don't think you are getting my point. I'm trying to tell you that the interest cost is not operating interest. It has credit card charges, bank charges, we are -- and cash management charges which are classified as finance costs. If you get to find -- if you divide finance costs by the debt, you will get -- obviously get a very large number. The interest cost also includes the bifurcation of lease rental into depreciation and interest. And this is a statutory requirement. So we cannot just take the interest number as stated in the financials and divide it by the debt to arrive at the rate of interest.

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Madhavan Karunakaran Menon, Thomas Cook (India) Limited - Chairman, MD & Executive Director - Foreign Exchange [31]

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[INR 1.6] to see how much that is...

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [32]

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Okay. So which is why I'm saying that, probably, it's better to take this discussion off-line. And then we can talk about the actual interest. I did give you the numbers for the actual interest cost during the quarter. Okay? And we can then talk about which entities has debt and which doesn't. And then probably it will clarify.

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Claire Barnes, Apollo Investment Management Ltd. - Founder and Portfolio Manager [33]

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Okay. My problem with taking it off-line is that I never get a reply to my e-mails to you. So...

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [34]

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But Claire, I've never got a mail from you. If you write to me, I can assure you, I can promise you, and there are about 70 participants on this call. I can promise, I'll make a public promise that I'll respond to you in 24 hours.

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Claire Barnes, Apollo Investment Management Ltd. - Founder and Portfolio Manager [35]

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Okay. Thank you. So if necessary, I'll ask somebody else to forward maybe falling (inaudible) your junk filters or something.

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Operator [36]

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The next question is from the line of V.P. Rajesh from Banyan Capital Advisors.

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V.P. Rajesh;Banyan Capital Advisors LLP;Managing Partner & Portfolio Manager, [37]

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Just a question on the interest and finance cost. You said about INR 4.7 crores is coming from the Ind AS change. And if I were to take it above the EBIT line because just to look at comparable numbers from last financial year, then your EBIT roughly comes to INR 40 crores or -- yes, about INR 39 crores, INR 40 crores. Is that the right math? Just wanted to clarify that.

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [38]

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Yes, that's the right math, I mean.

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V.P. Rajesh;Banyan Capital Advisors LLP;Managing Partner & Portfolio Manager, [39]

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Okay, got it. So basically, the EBIT was flat in this quarter. The second question is that in your interest and finance costs, you said there is about INR 12.9 crores of bank charges and other things that you explained. Is it pertaining to primarily your FX business? Or this is across all the businesses?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [40]

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This is actually across all the businesses. Because see, as we -- one factor that I should point out is that we are increasingly going online. Okay? And as we grow online, the payments we also accept, most of our payments are actually happening online through usage of instruments like credit cards. And as a merchant, obviously, there are MDR charges that we have to pay. So this is not something that we can wish away. It will be there, it's sort of part of the business. So the finance charges...

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Mahesh Iyer, Thomas Cook (India) Limited - CEO & Executive Director [41]

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It's recovered from the consumers.

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [42]

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Yes. And the other point -- other point that I must mention that it's not that it's a complete charge. It's a debit to the P&L because it's recovered. But the recovery goes through the revenue line. So it shows in 2 -- shows up in 2 different parts. The recovery of those credit card charges, et cetera, comes up through the revenue line whereas the cost fits in the finance charges. So there is a bit of a anomaly here.

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V.P. Rajesh;Banyan Capital Advisors LLP;Managing Partner & Portfolio Manager, [43]

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Okay. And then the -- one more, on the INR 17.7 crores of interest cost, what is the debt corresponding to that? Is it INR 300 crores? Or is it a higher number?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [44]

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So the external borrowing, total external borrowing as of December '19 is INR 356 crores.

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V.P. Rajesh;Banyan Capital Advisors LLP;Managing Partner & Portfolio Manager, [45]

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Okay. So the way to think about it, this is the interest cost pertaining to INR 356 crores of debt, right?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [46]

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Yes. Yes.

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V.P. Rajesh;Banyan Capital Advisors LLP;Managing Partner & Portfolio Manager, [47]

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Okay. And then you mentioned the cash is about INR 1,400-some-odd crores.

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [48]

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Yes, INR 1,413 crores, yes.

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V.P. Rajesh;Banyan Capital Advisors LLP;Managing Partner & Portfolio Manager, [49]

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Right. Could you just break it down and this will be helpful, just a feedback to say that what is the actual cash that belongs to the company versus the cash that belongs to the customers which is not really -- which is more like deposits made by the clients, et cetera, so that we have a real sense of what is the cash available to the shareholders?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [50]

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Actually if you go down that route and how much is the advance from customers, et cetera, we also need to then see how much is the advance that you have paid to vendors. Okay. So it should not -- we just should not take, it's like taking the debtors without considering the creditors or vice versa. So you need to then see both of these things together, only then you'll get to understand what's the overall picture. Otherwise it's a very unfair way to take out all the payables from the cash without -- and considering that none of the debtors would actually come back. It's effectively that. But to answer your question, the -- you're probably trying to work out what's the float. The float that we had on the BPC card was close to about INR 650 crores. And which is the -- which is the money that we receive on our prepaid cards. And the balance is obviously the cash that is there, either in Thomas Cook or with any of the subsidiary companies.

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V.P. Rajesh;Banyan Capital Advisors LLP;Managing Partner & Portfolio Manager, [51]

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So you're saying that roughly INR 750 crores of cash belongs to the business which is not used for your working capital or anything of that sort, right?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [52]

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No, No. Cash will -- see, cash does not sit idle. If there is cash, cash will get used in some form or the other. And we are in a business of Foreign Exchange where the cash requirement fluctuates daily. And therefore, it is -- it's highly volatile because -- and Mahesh can probably explain this better but let me try my hand at this. On a day when the rupee-dollar exchange rate fluctuates dramatically, say the rupee becomes a little more expensive, there'll be people who are having dollars will come out and try and sell those in the market. And on those days, our rupee requirement goes up because we need to buy dollars from those people. And therefore, we will need to use our cash reserves. So I cannot -- I'm not saying this cash is idle cash for us. So it gets used in some form or the other. Or rather most of it. There is, of course, fixed deposits. There is a large quantum of fixed deposits that we keep. Some of our foreign currency fixed deposits are being held in overseas bank accounts, et cetera. State Bank -- with State Bank quite -- but apart from that, the other cash is sort of there is a -- there is some amount of usage of that in and out. So there's no idle cash other than those deposits and investments.

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V.P. Rajesh;Banyan Capital Advisors LLP;Managing Partner & Portfolio Manager, [53]

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Right. So I think I understand your point but is it fair to say that the only cash that belongs to third parties which is not the company's cash is INR 650 crores. Is that the right way to think about it?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [54]

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You are saying the BPC cash? Yes, it is restricted in a way, restricted in the sense that, yes, it is for a particular purpose.

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V.P. Rajesh;Banyan Capital Advisors LLP;Managing Partner & Portfolio Manager, [55]

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Okay. All right. And then on the vacation business on Slide 18, your average unit realization went up more than 10%, like INR 3.5 lakhs. So what drove that?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [56]

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Ramesh, would you like to comment? Yes, yes, please.

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Ramesh Ramanathan, Sterling Holiday Resorts (India) Limited - Chairman & MD [57]

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Okay. Two reasons for the average unit recovery to go up. One is we had a price increase of around 6%. But that was only for part of the quarter because it came from almost mid-November. The second one is also increased number of upgrades coming in. We have 2 revenue lines in our membership program. One is the new membership units that we sell. The second one is the upgrades that we do. People who have bought a particular unit, moving up and are buying more points. So the average unit recovery is a combination of both these numbers. The upgrades went up and therefore the average unit recovery has also gone up.

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V.P. Rajesh;Banyan Capital Advisors LLP;Managing Partner & Portfolio Manager, [58]

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Okay. And any plans of major CapEx on the Sterling business side?

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Ramesh Ramanathan, Sterling Holiday Resorts (India) Limited - Chairman & MD [59]

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No, as I explained we are going on a major program of management contract resorts. This would mean that as we move further, we will have very little CapEx but for renovations in existing resorts and IT and digitalization to some extent, the plan is to grow very aggressively on management contract resorts. So that means no CapEx whatsoever.

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Operator [60]

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The next question is from the line of Nihal Jham from Edelweiss.

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Nihal Jham;Edelweiss Securities;Equity Research Analyst, [61]

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I wanted a couple of data points to start with. Sir, is it possible to share what was the quantum of delay in invoicing for this quarter?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [62]

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I cannot give you exact number because that again would probably tantamount a forward-looking statement. But overall impact -- the impact of the invoicing on the profitability will be in the range of about INR 20 crores.

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Nihal Jham;Edelweiss Securities;Equity Research Analyst, [63]

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INR 20 crores. That is helpful. And second...

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [64]

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INR 20 crores, it could be a little more than that.

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Nihal Jham;Edelweiss Securities;Equity Research Analyst, [65]

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Yes, the ballpark figure is helpful.

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [66]

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Yes, the ballpark. The ballpark figure.

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Nihal Jham;Edelweiss Securities;Equity Research Analyst, [67]

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Absolutely. The second thing is Digiphoto is obviously an acquisition which got consolidated in this quarter this year. So how has the Y-o-Y growth been on -- in that business for us?

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Mahesh Iyer, Thomas Cook (India) Limited - CEO & Executive Director [68]

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So let me just come in and address that. As far as Digiphoto is concerned, I think we have had a very good quarter, despite all the challenges, like as we mentioned on the call. This is a business that operates across the globe with Far East and Middle East being a big market. Middle East has been going through a bit of a slowdown. But despite that, they had a very good performance. They acquired some new sites (inaudible) which is effectively the Dubai Frame, the Dubai Aquarium and the Dubai Ice Rink. They got some 2 large contracts in the Atlantis, which is the Atlantis Bahamas and the Universal Studios Beijing. So from a pipeline point of view, that total acquisition or new contracts that they have inked in the last quarter, that will run-up in the full year of FY '21 is close to about $40 million. So that's the new pipeline of businesses that have got. For the current quarter, which is Q3, on a comparable basis, their volumes actually went up by about 7%, 8%. And profitability improved by about the same percentage.

This, despite the challenge that we saw in parts of Hong Kong, which was the unrest that we had and in parts of the Middle East. Despite that, they had a very strong performance. Just to give you some metrics around their performances, the number of partner addition actually moved up from 115 to 137, the number of sites that we operated last quarter was 227, this quarter is 257 and number of transactions was 1.56 million, which went up to 2.5 million. So this are some of the metrics. So effectively, it was a decent quarter for them. And we've been running on the expectation that we have put up for the business that -- when we acquired. So for the current quarter, the profitability in terms of a [metrics] was about INR 10 crores. And I think it's kind of trending on line of expectations.

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Nihal Jham;Edelweiss Securities;Equity Research Analyst, [69]

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Sir, the transaction increase is for the 9 months or for the quarter, 1.56 million to 2.5 million?

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Mahesh Iyer, Thomas Cook (India) Limited - CEO & Executive Director [70]

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That's for the quarter.

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Nihal Jham;Edelweiss Securities;Equity Research Analyst, [71]

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So that's more than 7%, 8% volume growth that you mentioned? Or is it that the number of sites is something you're counting as volume?

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Mahesh Iyer, Thomas Cook (India) Limited - CEO & Executive Director [72]

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No, we are counting the number of transactions as volumes because our revenue is recognized on number of transactions.

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Nihal Jham;Edelweiss Securities;Equity Research Analyst, [73]

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Okay, sure. And just to understand (inaudible) which geography would contribute to the maximum revenues? Would it be the Middle East, if I understand right?

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Mahesh Iyer, Thomas Cook (India) Limited - CEO & Executive Director [74]

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I think between Middle East and Far East, the share will be close to about 80% between the 2. And the rest is spread to U.S.A. and parts of China and stuff like that.

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [75]

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Africa.

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Mahesh Iyer, Thomas Cook (India) Limited - CEO & Executive Director [76]

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Africa. Yes.

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Nihal Jham;Edelweiss Securities;Equity Research Analyst, [77]

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That is helpful. There will be a few more questions. Maybe I'll take it offline. Just getting on the cash part. So Debasis mentioned that around -- the float on the business is around INR 750 crores, that's in the BPC cards. In addition, is there a -- concerning the nature of the business that it is, there is a minimum requirement of cash, as you said, you need to keep because of the Forex volatility and also because of advanced payments at times. So is there a kind of restricted cash that is minimum required? And then possibly, you want to look at what is the cash which is freely available for us for acquisitions or for dividends in the future out of the current INR 1,400 crores that's sitting on the books?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [78]

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There is, unfortunately, no single answer on that one because technically if I need cash for our working capital, I can always fall back on the overdraft limits, okay? So essentially, there's nothing called restricted cash, maybe other than the BPC float.

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Nihal Jham;Edelweiss Securities;Equity Research Analyst, [79]

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Sure. And now that for Sterling, obviously, the focus ahead will be on management contract. And as said, the CapEx requirement will be reasonably lower compared to the earlier years. So what is the thought process on using the incremental cash? If you could just give a sense, whether it will be a dividend policy? Or even in terms of acquisitions, what are we looking at? That would be helpful.

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Madhavan Karunakaran Menon, Thomas Cook (India) Limited - Chairman, MD & Executive Director - Foreign Exchange [80]

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So look, I think, if I make any statement as a response to what you're asking, it will be viewed as guidance of futuristic. So at this point of time, I'll stick to the statement that I've always made. We will evaluate acquisition opportunities as we go forward. But I can assure you that dividends will also get focus as we go forward. Obviously, the budget has changed some of these equations. And therefore, we will consider both these options as we go forward.

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Operator [81]

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The next question is from the line of [Ritvik Sheth from 1 Up Financial].

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Unidentified Analyst, [82]

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Sir, few questions. Firstly, on the advance booking for summer 2020, how is it looking like so far?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [83]

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Mahesh, (inaudible) I would -- you've asked a question on the advanced booking for the summer. And I request Mahesh to talk about it.

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Mahesh Iyer, Thomas Cook (India) Limited - CEO & Executive Director [84]

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Okay. So currently, it's a little too early to comment on the forward bookings. And I'm saying more specifically because if you look at it, we operate 3 brands on the outbound space. Obviously, I'm going to keep the Hong Kong operations out of it but we've got SOTC and Thomas Cook, the 2 brands that we operate on this space. You will appreciate that we had the news of Thomas Cook U.K. coming in the last week of September. Hence, we delayed our launch for the summers whereas SOTC went ahead with its launch early in September itself. So from a pipeline point of view, our pipeline started a little later as far as Thomas Cook is concerned but as far as SOTC is concerned, it started much early.

From a view at this point in time, for Q2, which is calendar Q2 for FY '20 which is the peak of the summers, our forward bookings are almost like 7%, 8% growth over the previous year at this point in time. Albeit, we have seen, as Debasis mentioned and there was a question in this regard previously in terms of average transaction value. We are seeing some change in patterns as how customers are traveling, they are preferring the more shorter product, the shorter format of the product, as a result of which the ATPs are impacted but the silver lining there is that people are taking more frequent holidays. So we've got -- getting the same customer travel with us a lot more. And that we believe is far more sustainable. So the big -- answer to your point is we are seeing about 7%, 8% growth for Q2 at this point in time.

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Unidentified Analyst, [85]

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So far. Okay. Sure. And sir, given all the disruption or some issues in the last 12 to 18 months from starting from Jet and then now till coronavirus and all that. So last 12 to 18 months have been a bit subdued for the domestic and some part of outbound and then the Thomas Cook issue and all that. So taking a step back and taking a 2- to 3-year view, what is your outlook on the travel segment? And what kind of growth is possible in next 2 to 3 years?

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Madhavan Karunakaran Menon, Thomas Cook (India) Limited - Chairman, MD & Executive Director - Foreign Exchange [86]

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Okay. Look, I think what has happened in 2019 is now behind us. I think the impact of coronavirus, as we see it right now is, hopefully limited to this and nothing more. Obviously, a pandemic is a pandemic, and none of us can sit and speculate where that will go. My expectation is that growth will come back into both domestic as well as international as we go forward. It may take a little time to get back to the pre -- the 2018 or '17 growth rates. I'm fairly confident that in -- during the latter half of '20 and into '21, we will see us going back to normal growth rates again. And I must add here that both Mahesh and Vishal are sitting here and I'm going to ask them to add their comments. But I think we are recalibrating all our packages, our products to meet these changed circumstances. So earlier, the changed circumstances is always how do we deal with the OTAs, with the various things they're doing. I think that situation has changed. And now we need to look at multiple other circumstances and recalibrate. And I think given the domain knowledge we have within our companies, we are actually able to do that far more efficiently than we would have done earlier. But I'm going to call -- ask Vishal and Mahesh to make their comments.

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Vishal Suri, SOTC Travel Service Pvt. Ltd. - MD and Director [87]

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This is Vishal here. I think Madhavan has already put it. We believe that the growth will be back. Even at this point in time, despite the headwinds, we've had a strong quarter. We spoke about that earlier, especially on the B2B side of the business. And even in the B2C side of the business, we are looking at about 7% to 8% growth in terms of our forward bookings for summer of 2020 which is a big season. We have recalibrated our entire portfolios as long-haul and short-haul. And short-haul is becoming an area where we are seeing a lot of uptick because of something that Debasis just mentioned because people are preferring shorter duration holidays and obviously proximity to India and around is obviously seeing a lot of -- is seeing actually a far better demand. Our theme, actually when we are going into summer 2020, has been affordability because we saw some of these headwinds coming in. So our packages are designed in a manner so that we can derisk our business from a long-haul dependency perspective which is where we were -- we have traditionally been doing extremely well. So that's where we are. We believe there is an inherent demand in travel, especially leisure travel, people never cancel their programs. They generally postpone it, basis, what is the environment at that given point in time. So growth will be back at some point in time. On coronavirus, at this point in time, it's too early to comment, and I think Madhavan and Mahesh and Debasis have already commented on that.

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Mahesh Iyer, Thomas Cook (India) Limited - CEO & Executive Director [88]

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1

Just the other point I want to add to what Vishal said in terms of an outlook for this industry. We've been seeing a 14%, 15% growth and we believe that, that growth is [there]. More importantly, the point that Vishal emphasized on, which is affordability. That's something that you will see visibly into the communication that we are making to the consumer. We actually launched -- because when the customer is coming into a bit of a sentiment related issues, we've got to make the package more affordable and also give him easy options to afford that holiday. So we've launched the Easy Payment Plan where the customer actually pays 10% upfront and the balance 90% is paid only 30 days prior to departure. So that gives him the flexibility to plan his finance also. So I think it's more about structuring your packages slightly differently to get back to the growth momentum that we had in '16 and '17, and we believe the industry is ripe for it. There is enough and more opportunity for us to kind of go to that 15%, 20% growth.

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Unidentified Analyst, [89]

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Right, right. This is very helpful. And couple of bookkeeping questions. Firstly, capital employed of other and unallocable has sharply increased from INR 600 crores to INR 1,200 crores quarter-on-quarter. What is this regarding?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [90]

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Give us a minute, please. (inaudible). I guess we'll come back to you. I'm just trying to -- because it's -- we are -- we're just looking -- I'm trying to look at those numbers, we need...

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Unidentified Analyst, [91]

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And just one last one. I wanted to reconcile the cash flow. Is it around INR 130 crores to INR 140 crores in the 9-month FY '20 before any working capital changes and any CapEx that we would have for the group?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [92]

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How did you get a cash flow number because we haven't given out any cash flow indicators?

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Unidentified Analyst, [93]

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Yes. So just was doing some backward calculation, depreciation and adding back the reported losses of the vacation ownership.

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [94]

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This is sounding very complex. So what we have decided to do. And I think we spoke about it in the earlier analyst meeting is that we will give out our cash flow numbers on a half yearly basis, whenever we publish our balance sheet or the statement of assets and liabilities. So we'll give it out in September and March but we do not give it out in the -- because we don't really draw up a full-fledged balance sheet on 31st of December, audited balance sheet. And therefore, we are not working out a cash flow number.

We don't want to do a rough calculation because that can be erroneous and this is -- becomes a public number which can give very wrong impressions in the market.

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Operator [95]

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The next question is from the line of Manoj Bahety from Carnelian.

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Manoj Bahety, Carnelian Asset Management LLP - Co-Founder [96]

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I got dropped off from the last question. So just coming back on my first question. Like -- I understand like China and Hong Kong business got impacted, that's a direct impact. But are you seeing like some inquiries or some signs of cancellation of travel outside China? Let's say, means people traveling on holidays to some other destination. But because of this, the way it is increasing day by day. So are you seeing some early signs of cancellations of travel to non-China territory on account of this?

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Madhavan Karunakaran Menon, Thomas Cook (India) Limited - Chairman, MD & Executive Director - Foreign Exchange [97]

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No, Manoj, I think you missed the latter half of what I explained.

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Manoj Bahety, Carnelian Asset Management LLP - Co-Founder [98]

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Sorry, I got dropped off from the call.

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Madhavan Karunakaran Menon, Thomas Cook (India) Limited - Chairman, MD & Executive Director - Foreign Exchange [99]

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Yes. No, no issue. Let me just repeat for the sake of clarity. We -- it is too early to tell if there are any cancellations. And I -- actually my last sentence in that is, every time you travel abroad right now, you're going to ask yourself the question, what is my potential exposure to the coronavirus. I don't -- I personally believe that if this gets contained and does not become a pandemic, this will wear away over the next couple of months. In fact, I will refer to an article that appeared in the New York Times this morning where they're actually saying that all these viruses normally tend to come in China during the winter time. And that same article talks about medicines that are used for HIV, anti-HIV treatment that are going to be used to treat the coronavirus. In fact, India is one of the large manufacturers of this particular type of drug. And so my expectation is that over the next 2 months, they will at least bring some semblance of containment. And if that is achieved, I think it will have no impact. The other point I want to make is unlike in the case of SARS several years ago, the world got to act on it at that time only after it had spread. Here, you will note that the minute the alarm was sounded in China, governments around the world have actually reacted very fast and closed borders and all sorts of things. So I think -- even if you look at a small country like Hong Kong today, their borders for all names and purposes are shut on Chinese tourists. So I think the world is reacting much faster than it did on SARS. And therefore, I have some hope that the impact on our business will be limited.

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Manoj Bahety, Carnelian Asset Management LLP - Co-Founder [100]

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Right. Right. Thanks for this clarification. And also, second question which I had is on the accounting policy change or the structural change in the Sterling holidays business. How it allows us to defer the expenditure? Like I just wanted to understand like what kind of arrangement allows deferment of expenditure which was earlier not allowed?

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Ramesh Ramanathan, Sterling Holiday Resorts (India) Limited - Chairman & MD [101]

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Okay. Manoj, what happens is you -- I presume you are aware of what happens under Ind AS 115. Revenue is straight-lined over that period of the obligation, in our case, 25 years on the membership. Whereas all expenses which are not incidental to sales are booked upfront, and therefore, hitherto, we could avail of the straight-lining of incentives and offers that we made to customers. Ind AS 115 also says that if the -- the sales is completely given out to somebody, for example, I appoint a franchisee who employs his own people. So salary, offices, marketing costs, everything is taken care of by them. And then we pay them as commissions on sale, then those expenses, the expenses can then be straight line. So that is what we are doing. We are paying all the arrangements that we have made in sales and marketing. We have converted all our sales, membership sales into franchisees. We have been working on it for some time. And from 1st January, we have effected this. And therefore, the expenses other than incentives and offers which we were straight-lining hitherto, will also get straight-lined.

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Manoj Bahety, Carnelian Asset Management LLP - Co-Founder [102]

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Okay. So if I understood it rightly, it means that even our internal sales team will move to that franchisee, it will be...

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Ramesh Ramanathan, Sterling Holiday Resorts (India) Limited - Chairman & MD [103]

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They've already moved -- they've already moved as of 1st January.

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Manoj Bahety, Carnelian Asset Management LLP - Co-Founder [104]

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It's a different legal structure or it is like indirectly owned by us only?

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Ramesh Ramanathan, Sterling Holiday Resorts (India) Limited - Chairman & MD [105]

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Yes. It is not owned by us anymore. They do it but we guide them. So we provide all the inputs. It's like any other -- we already had for example, we already had some franchisees, the guys who sell in our resorts and all that, had people on their team, they used to do their own marketing. So that was a very small component. Now the entire component of sales has moved into that system.

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Manoj Bahety, Carnelian Asset Management LLP - Co-Founder [106]

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Okay. So your entire team, the sales team who was earlier selling, will move to that entity and even advertisement, promotion, all those activities will be taken care by that entity?

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Ramesh Ramanathan, Sterling Holiday Resorts (India) Limited - Chairman & MD [107]

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If they do, then -- and I pay them on sales, then I can straight line. We will still be doing brand and so on. For example, the lead generation, which is our major marketing expense in this case, if they do it on their own and I reimburse them as sales incentives, then I'm allowed to straight line. But if I -- the company is -- Sterling were to do an advertisement or a brand advertisement, we still have to book all those costs upfront.

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Manoj Bahety, Carnelian Asset Management LLP - Co-Founder [108]

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Got it. Got it. And last question I have on [DIS]. How you are seeing in terms of return on your capital or IRR basis the investment over the next 3 to 5 years?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [109]

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Sorry, as I understood -- as I understand, you are looking for some sort of guidance on the return?

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Manoj Bahety, Carnelian Asset Management LLP - Co-Founder [110]

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Yes. In fact, like whenever you have made this acquisitions, like some kind of internal benchmark you might have used, I'm not looking on future guidance. I'm just trying to understand like what kind of capital allocation or what kind of internal hurdle rate at which you're working while making these kind of acquisitions?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [111]

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Okay. So you see the -- it is -- the philosophy of our acquisitions are slightly different. So in some of these cases, for example, when we bought over the DMS business in 2017, we knew very clearly that it's a loss-making business and it will take we -- at that time, we said it'll take 3 years to even turn around. So we see in 3 years we did not expect a return on equity or return on capital employed from that business. But we knew that it's a little longer duration, it's more than 3 years, okay? So we don't have a standard template because it's not that we are going out and looking for acquisitions. We sort of -- we keep on evaluating, keep on waiting for opportunities for a value buying proposition. Rather than going aggressively, like the private equity and getting -- trying and seeing everything through the same template. So the short -- in short, the answer is that we don't have a standard template. But in the longer run, we endeavor to deliver a 15% return on the capital employed.

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Manoj Bahety, Carnelian Asset Management LLP - Co-Founder [112]

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Got it.

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [113]

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But that period -- that period would depend on the state of the business, at which stage of the business that we have bought it.

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Operator [114]

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Ladies and gentlemen, that was the last question. I would now like to hand the conference over to the management for closing comments.

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Unidentified Company Representative, [115]

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Mahesh, closing comments?

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Debasis Nandy, Thomas Cook (India) Limited - Group CFO for Thomas Cook Group [116]

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This is Debasis here. Thank you once again for taking time out this morning. It's been a -- I'm sure it's a busy morning for all of you. Now it's the first working day after the budget. But thanks for taking time off and coming on to the call to sort of listen to us. We will see each other again at the [end] of the next quarter. Thanks so much.