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The camping division, which contributed about 16 per cent of the tour operator’s consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) for 2013-14, is an important business of its subsidiary, Holidaybreak Ltd. Cox & Kings acquired Holidaybreak in 2011 for about Rs 2,300 crore and the deal was funded with dollar debt valued around Rs 1,500 crore. A year later, Citi Venture Capital invested $140 million in Holidaybreak, which has two main business segments, education tours and camping.
“The sale of the camping business is consistent with our strategy of becoming a leisure and education travel group and allows us to focus on these businesses that have a global footprint and market leadership position,'' said Peter Kerkar, director, Cox & Kings.
The Indian operations contribute about 25 per cent of the company’s consolidated revenue and the balance comes from overseas business. In the last fiscal year, the company reported consolidated EBITDA of Rs 1,100 crore and Holidaybreak’s share was about Rs 400 crore. The camping business contributed about Rs 160 crore, valuing the transaction at 5.5 times the segment EBITDA.
“Camping is a legacy business of Holidaybreak and we managed to grow it. However, this business has no synergy with the Indian market and we did not see a demand here,” Kerkar said.
Also, the camping business runs for only four months, April to September, and though it is profitable it sucks working capital in other periods too.
The Indian outbound season coincides with the off-peak season in Europe and the acquisition could reduce the seasonality of Holidaybreak’s business. Kerkar said camping tours had no demand from India. He stated the company had begun promoting education tours in India, adding that 15,000 students from India took part in trips within India and abroad.
“Last year, the domestic business grew 11 per cent. We are expecting better growth this year. Schools have out-of-class learning activities and we see growth for the education tour business in India. The base is small but it is catching up,” said Anil Khandelwal, the company's chief financial officer.
“We are in a comfortable position and both our domestic and international businesses are growing. We have been able to service debt. Unless there is a compelling reason to do so, we will not look for equity at the group level,” Kerkar said.
FUNDING CRISIS
- The camping division, which contributed about 16 per cent of the tour operator’s consolidated EBITDA for 2013-14, is an important business of its subsidiary, Holidaybreak Ltd
- Cox & Kings acquired Holidaybreak in 2011 for about Rs 2,300 crore and the deal was funded with dollar debt valued at around Rs 1,500 crore
- The Indian operations contribute 25 per cent of the firms consolidated revenue
