When the stock of Thomas Cook Group Plc plunged by 67 per cent on Tuesday in the UK markets on a profit warning, the stock of the Indian arm too fell in sympathy, by 9.6 per cent.
Interestingly, this slump has brought the market value of the UK parent quite close to that of the smaller Indian operation.
After a 93 per cent fall in the last one year, Thomas Cook Group Plc has a market value of just £118 million, Rs 972 crore in rupee terms. That's only 16 per cent more than the valuation that Thomas Cook India (a 77 per cent subsidiary) enjoys in Indian markets. It has a market cap of Rs 845 crore.
The Indian arm has performed much better than the parent in the past year, boasting strong fundamentals and fairly bright prospects. Even as the UK parent has issued profit warnings on slowing travel out of Europe, Thomas Cook India has delivered strong growth this year.
After doubling its profits between 2009 and 2010, Thomas Cook India reported a further 18 per cent growth in sales and a 30 per cent jump in profits during the first nine months of 2011.
Travel and related services (92 per cent of sales) were the main revenue driver. Even though the domestic travel and tourism industry is cyclical, the industry has been booming in India, with high disposable incomes of Indian giving a fillip to foreign travel.
India is one of the fastest-growing outbound travel markets in the world, with international tourists out of India growing exponentially in the last few years and Thomas Cook's entrenched presence in this market has helped its performance. Nor does the Indian arm have material difficulties with debt, as its debt-equity ratio was perched comfortably at 0.59 by end of 2010.