Thomas Cook (India)’s subsidiary Quess Corp is going to hit primary markets on Wednesday through an initial public offering (IPO) in the price band of Rs 310-317 per share. According to Sharekhan, the impending value unlocking in Quess Corp (QCL) was a key trigger for Thomas Cook stock price rising in the recent past.
Since the beginning of the ongoing financial year, shares of Thomas Cook surged 16 per cent to Rs 218.30 on June 27. The scrip was trading at Rs 188.05 on April 1.
The QCL IPO would result in 10 per cent stake dilution for Thomas Cook to about 63 per cent (from the current holding of 69.5 per cent). QCL will largely utilise the funds raised from the IPO for working capital requirements and inorganic growth initiatives.
QCL is one of the largest staff service providers in India and has four major business verticals – global technology services (EBIDTA margin – 7.1 per cent; headcount – 8,800), people and services (EBIDTA margin – 3.5 per cent; headcount – 82,575), integrated facility management (EBIDTA margin – 6.11 per cent; headcount – 20,355) and industrial asset management (EBIDTA margin – 11.5 per cent). The company is focusing on improving its revenue mix by entering the high-margin business verticals. It is also working on improving utilisation. These measures should help in improving the operating margin from the current levels of 5 per cent. Sharekhan expects improvement of 60-80 basis points per annum in the coming years. Also, QCL is focusing on improving its working capital cycle (already cut debtors days to 45 days in FY2016 from 66 days in FY2011) to boost cash flows, which will make it self-sufficient in the long run.
Sharekhan in a research report said “We maintained our positive view on Thomas Cook, as we foresee better growth prospects in its key business verticals of HR service management and travel & tourism (due to acquisition of Kuoni’s India and Hong Kong business). Further, the business value of QCL is broadly in-line with our expectations and has already been factored in our price target (PT) of Rs 255. Thus, we maintain our ‘Buy’ recommendation on TCIL with the unchanged price target.”
TCIL’s management is expected to achieve better earnings growth in the coming years.
For the quarter ended March 31, 2016, Thomas Cook reported a consolidated net loss of Rs 76.77 crore against net loss of Rs 1.01 crore in the corresponding quarter a year ago.