In a sudden but not entirely unexpected move, the UK-based promoters of Thomas Cook India — Thomas Cook UK Ltd and TCIM Ltd — have pledged their entire stake in the Indian company with Royal Bank of Scotland PLC. While pledging the shares may help raise cash for the debt-burdened UK parent, this could have implications for investors in the Indian arm, too.
Much depends on whether Thomas Cook PLC manages to raise cash at a later date to release its pledged shares. If not, the Indian company's shares could be put on the block.
Tour operators like Thomas Cook India present a good growth opportunity as India is among the biggest growth markets for travel and tourism worldwide. Besides, financial woes of the UK parent do not have any direct impact on the business of the Indian company.
Second, Thomas Cook India has decent fundamentals and fairly bright prospects. It delivered a 23 per cent growth in revenues and a 56 per cent expansion in net profits in the first half of this fiscal even as most companies struggled to deliver profit growth.
Cash raised through sale of stake could make a big difference to the Thomas Cook Group, as the Indian company is valuable. Thomas Cook PLC has a market value of £131 million (about Rs 1,060 crore), just 33 per cent more than that of the much smaller Thomas Cook India. It has a market capitalisation of Rs 710 crore.
In the event of such a stake sale by the promoters, shareholders may expect prices to rise. While the exact play of events remains to be seen, the Indian company's brand advantage and established business could fetch it a good valuation. Currently, Thomas Cook UK Ltd holds 4.53 crore shares or 21.39 per cent in Thomas Cook India, while TCIM has 11.81 crore shares or 55.72 per cent stake in the company. Small investors hold about 15.61 per cent stake in the company.