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Thomas Cook (India) Ltd
Earnings Call Analysis
Q1-2025 Analysis
Thomas Cook (India) Ltd
Thomas Cook (India) Limited reported a consolidated profit before tax (PBT) of INR 107 crores for Q1 FY '25, marking a healthy year-on-year growth of 17% when adjusting for last year's mark-to-market numbers. The total income from operations saw a rise of 11%, showcasing productivity benefits across the company. Notably, revenue growth was largely driven by the travel services segment, which recorded a robust 15% increase, propelled mainly by 21% growth in holiday revenues.
The company's diversity, both in business lines and geographical reach, has proven to be a major strength. SOTC, celebrating its 75th anniversary, achieved record profit this quarter, underlining stability in margins throughout the group. The company continues to focus on maintaining stable margins for its operations, despite slight fluctuations in specific areas.
Within the travel services, both outbound and inbound segments performed well. Outbound holiday revenues hit INR 610 crores, reflecting strong demand for short-haul and domestic travels. The company is on track for a potential full recovery in outbound travel to pre-COVID levels, with expectations of reaching close to the FY '20 outbound market size of INR 2,400 crores. Fee categories, such as MICE (Meetings, Incentives, Conferences, and Events), showed resilience, with growth rates exceeding 20%.
Sterling Holidays has accelerated its growth with the opening of multiple resorts, reaching a milestone of 50 operational locations. Despite temporary headwinds, revenue grew by 9% to 10%. The company is planning to add 20 new resorts in the next 12 to 18 months, which positions Sterling for significant future growth. The asset-light business model is expected to keep Sterling debt-free while increasing its cash reserves.
While some segments faced challenges, such as adverse weather and competitive pressures, the company's commitment to investing in technology to enhance operational efficiencies was reinforced. Thomas Cook’s management forecasts that, with ongoing investments, they can navigate current challenges and set a course for sustained growth in the coming quarters.
The management has revised its EBIT margin guidance to remain within a sustainable range of 40% to 45%. There is optimism about achieving medium-term targets with margins potentially expanding to 4.5% to 5% over the next few quarters. The overall forward bookings remain strong, with the management expressing confidence in recovering pre-COVID sales levels.
Despite the promising outlook, management acknowledged potential risks from external factors like geopolitical instability and climate conditions that could impact travel patterns. However, the diversity of the revenue streams and geographical operations serves as a hedge against these uncertainties, enhancing their resilience in unpredictable market conditions.
For potential investors, Thomas Cook exhibits a solid foundation for growth with strategic expansions and a diversified portfolio. Maintaining a watchful eye on margin stability and growth in all segments will be crucial in the upcoming quarters. The emphasis on technology and operational efficiency could provide an edge in an evolving travel market, making this a prudent investment consideration.
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Ladies and gentlemen, good day, and welcome to Thomas Cook (India) Limited Q1 FY '25 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand conference over to Mr. Ranjit Cirumalla from IIFL Securities Limited. Thank you, and over to you, sir.
Thank you, Steve. Good morning, everyone, and thank you for joining us on Thomas Cook (India) Limited Q1 FY '25 Earnings Conference Call. From the company, we have with us Mr. Madhavan Menon, Executive Chairman and senior management team. We would like to begin the call with the brief opening remarks from the management, following which we will have the forum open for an interactive Q&A session. I would now like to invite Mr. Madhavan Menon to make the initial remarks. Thank you, and over to you, sir.
Good morning, ladies and gentlemen. Let me just introduce the people from the management, participants from the management who will participate in this call. Mahesh Iyer, the MD of Thomas Cook. We've got Mr. Ramakrishnan, the MD of DEI. We've got Mr. Vikram Lalvani, MD of Asian Sterling Holidays Resorts, and we've got Debasis Nandy, who is the Group CFO.
I would like to address several issues in today's call. So just bear with me. First of all, thank you very much for participating in this call. If I look at the results, the consolidated profit before tax was INR 107 crores, which is a growth of 17% year-on-year after excluding the mark-to-market numbers. You will appreciate that the mark-to-market numbers last year are really not comparable anymore because the number of Quess shares that Thomas Cook holds is significantly lower this year than it was in the previous year.
If I look at total income from operations, it was 11% at a consolidated level, and which in -- if I look -- compare that to the PBT, it will be very evident on the productivity benefits that the company continues to carry as well as the benefits of the cash holdings across the group. In terms of the travel services, and I'll talk briefly about each of our businesses.
Travel services, and foreign exchange had a good quarter. The PBT of 20% over -- growth of 20% over the previous year. As far as Sterling is concerned, I would like to draw your attention to a press release that was released to the exchanges this morning, which has a detailed explanation on Sterling's performance. However, I will leave it to Vikram to address your questions on that. However, having said that, I think, I need to draw your attention to the fact that sterling is, in essence, is in an investment and expansion mode and has been in this state since the previous year. Just for the record, if I take calendar year '24, they have already opened 5 resorts this year, and they are planning to open another 8 to 10 resorts during the rest of the year. You will appreciate that opening a resort has got a gestation period. It doesn't mean that you open the doors and it will start doing business on the very next day.
I would like to address -- the last point is, if you look at the earnings of the group, it clearly reflects diversity both from a business point of view, as well as from a geographical point of view. So in some ways, and I'm not justifying the performance of any particular company here, but the ability to manage movements in the performance of companies across the group through this diversity is a strength that Thomas Cook has carried for a long time, and it continues to carry. This is the last mention, SOTC celebrating its 75th year actually had a record profit in this quarter, and they will continue to hold for the year.
Just one more point that comes to mind. If I look at the performance in this quarter, I expect that there will be -- there are some points that you will have questions on. But I just want to assure you that in terms of margins, we have stable margins. I know there have been some concerns about it being flat. But I think the correct word is stable. Stability in our margins is something that we will persevere as we go forward. With that, I'm going to hand over to Mahesh.
Thank you, Madhavan, and good morning, everyone. And I'll take on some words Madhavan left and give you some key highlights before I get into the segments. If I look at, as Madhavan said, income from operations adjusted for MTM impact grew 11% to INR 2,132 crores. This growth is largely attributable to the travel and travel-related services, which grew 15%, led by holidays, where the growth was 21%. MICE adjusted for the government business, you will appreciate the fact that last year, we had done government businesses during the first half, in fact, actually the whole of the year.
And if I just look at this quarter and specifically, if I adjust for that, the growth on the MICE business was 31%. India DMS business, which is inbound into India, grew 58% and overseas DMS grew 26%. Consequently, EBITDA margins remained stable and resilient at 7.6% despite headwinds that we saw in some of the geographies that impacted certain segments of our businesses. As Madhavan said, there were some headwinds in some of our markets.
And despite that, we held our margins at 7.6%. PBT adjusted for MTM grew 17% to INR 107 crores, which, as Madhavan rightly said, reflects the group's ability to withstand seasonal and external disruptions by the geographical and business segment diversification.
Moving on to the segmental performance, I will first talk about the foreign exchange segment, revenue, albeit while it looks flattish, it is important to call out. And as I've been mentioning in the previous 2 calls, we had Bangalore Airport that we operated in the last year, we ceased operations at Bangalore Airport from September of 2023. So for one more quarter, you're going to see the Bangalore Airport revenue sitting in our books, but there was no profitability because it was either breakeven or a marginal loss case.
So we exited the Bangalore Airport contract, but that revenue sat last year. So if I exclude for that and the higher volumes on Hajj that we did last year, revenue actually grew by about 10%. If I look at the growth that has come in into the revenue is primarily coming from the retail volumes led by holidays where the volume grew by 10% and on the student segment by 21%. Gross margins for the business improved from 1.35% to 1.5%, an increase of 15 basis points, largely led by the retail volumes. Card loads increased by 13% Y-o-Y, and the incremental float generation was INR 210 crores. Distribution footprint for the foreign exchange business expanded by 7 outlets during the year, specifically in the Tier 2 and Tier 3 markets, aligning with our strategy of last mile fulfillment of supporting our digital journey.
I'm happy to report that our digital adoption at this point of time continues to be at that 21% mark, and we'll continue to build scale as we go. As I mentioned, the last time around, we introduced VKYC and TCPay, 2 pioneering products to the market. And we believe that, that will get further momentum to our digital eruption as we go along. EBIT margins improved by 500 basis points from 47% to 52%. And I'll just call out that this is a high but not necessarily something that we will hold on for the rest of the year. We have guided the market to a 40% to 45% range. And I believe that's the range that we will operate for the full year. This time, specifically the expansion on retail margins and some benefits on our card portfolio led to an expansion of our EBIT margins, but we remain committed to 40% to 45% guidance that we have given, and we believe that's sustainable in the long term.
Moving on to the Travel segment. Revenue grew by 15%, led by Holidays, where the revenue growth was 21% and MICE at 30%. Holidays, the 21% growth actually came from short haul, domestic and long haul with the short-haul leading the pack with a 30% growth, followed by domestic at 21% and long haul at 13%.
Outbound Holidays, as a part of the travel segment stood at INR 610 crores for Q1 FY '25. I think there was a question last time around, and we expressed that while -- if you look at FY '20, the total outbound market or the volumes that we did was close to INR 2,400 crores. Currently, in Q1, we actually had about INR 600-odd crores. So if I look at it from that perspective, we are at about 25% of the annualized volume. So I believe what we guided the market to be more likely to be closer to 100% recovery plus or minus some vagaries in the environment that may come along. But at this point in time, our confidence is that we would see a full recovery in the current year. Gross margins have improved, specifically on the B2C business by about 50 basis points, largely contributed by the domestic and the short-haul segments. Consequently, EBIT margins improved by 40 basis points.
Again, I'll call out here that we guided the market to an expansion of margin. Our medium-term estimate is that the margins will go up to close to 4.5% to 5%. We have expanded our margins in the current quarter by 40 basis points from 3.45% to 3.85%, and we believe that over the next 4 to 6 quarters, we should be moving to the 5% range that we have guided the market to.
If I look at the forward bookings that currently we have they look fairly strong. We had also mentioned in the previous call that the impact of elections will see a longish holiday stroke summer season, and we are witnessing that specifically in our short-haul or domestic volumes forward bookings where they are actually trending double-digit growth. Long haul is slightly picking up, but we believe that because it's longest trend that we're going to see, we are witnessing strong demand coming in for the long-haul segment specifically in the winters.
MICE volumes adjusted for the government business grew about 20% Y-o-Y, reflecting the strong demand from the corporates, for the MICE event and the indication of the corporates appetite to spend. We managed large groups ranging from 300 to 2,500 people, and our forward booking on this looks very strong and indicates close to a double-digit growth at this point in time.
On the Corporate Travel, ticket volumes increased in double digits, and we saw stability in the average ticket price. It's important to highlight that input costs have stabilized, whether it is land or it is airline. And despite that, our volumes have grown. So I think that's a good measure to have because markets you're seeing some amount of normalcy hence the growth trajectory can be better predicted.
As mentioned in our previous earnings call, the shift to international is visible. In the current quarter, the international volume was close to 52%, which moved up from about 45%. Domestic continues to be about at 40% and non-air contributes 8% of our volumes.
Before I hand over to Debasis, I would like to mention here the recent announcement in the budget that allows the setup of TCS with TDS. We believe that this will leave a little more cash in the hands of the holiday maker and should allow or help consumer discretionary categories like our with -- where customers will have more money in their hands to spend.
On that note, I'll hand over to Debasis to give you a little more lens on the India inbound and the overseas DMS segment. Thank you.
Thank you, Mahesh. So the DMS and the inbound business in India and international is, a fine performance in this quarter. Between the two, the total turnover of INR 607 crores as it was INR 475 crores last year, that's an increment of 28%. And if I compare that to the pre-COVID years, it actually grew by 33% over FY '20 number for the corresponding quarter. The business, the inbounds and the DMS business together constitute over 36% of sales for the travel segment.
If I go more granular and start talking about the individual countries, the [ Travel Promotion of India ], which continues -- which works on the India DMS segment, reported a growth about 58% in this quarter. It is important to note that every June quarter is not a time when foreigners come to India. But even then, the business has done very well. And the upcoming business, we start from late October and goes until end of March or early April, the order booking for that period looks pretty good. As far as the other [ trade tiers ] are concerned, Desert Adventures, which operates in the Middle East, reported a steady performance as compared to last year in spite of the fact that the business was disrupted because of the weather conditions, unseasonal rains and flash floods that happened in Dubai and Abu Dhabi sometime in April. And obviously, there's slowdown in Jordan because of the disturbance that is happening in Israel and Palestine. U.S. registered a very strong volume growth in this quarter as compared to the previous year. We are in summer for the U.S. and that's the peak season and the business is expected to deliver very, very strong results in this quarter as well.
Coming across to Africa. In South Africa, -- private sector in South Africa, business was slightly disrupted because of the elections. But now that the elections are over, we expect the business to come back strongly. And in case it is doing much better than what it was doing last year. Moving over to East Africa, Kenya, where we have private safari in East Africa, the sales are stable. The volumes are fairly steady in key markets such as from -- key markets of U.S.A., Germany, U.K., et cetera. And in case of Asia Pacific, where we have one of our large units, Asian Trails, this is the unit which came back to -- came back on the recovery path much later than others because the markets opened up fairly late last year, but business is doing pretty well. This is, again, not the peak season for inbound in Asia, just like in India, but the markets of Thailand, Vietnam, Malaysia and Singapore have done very well.
One call out that I need to make. In this quarter, we have to take a provision for a doubtful debt of close to about $0.5 million between entities in East Africa and in Asian Trails. This was necessitated by the sudden declaration of bankruptcy by a large European travel unit called FTI, which happened to be one of our customers. And while the process of greater settlement, et cetera, the resolution process is on, we thought it's only prudent that we take this provision for doubtful debt at one go. So the whatever results that you see in this quarter is down by about INR 5 crores on account of this alone.
So on that note, I would like to hand over to Vikram Lalvani so that he can talk to you more about Sterling.
Thanks, Debasis. Good morning, ladies and gentlemen. My name is Vikram Lalvani and I'm the MD, CEO of Sterling Holidays Resorts. I'm joined by my colleague, L. Krishna Kumar, who is the CFO. It's a privilege to interact with all of you today.
As we've seen, Sterling has delivered a quarter 1 revenue of INR 1,257 million. Despite some temporary headwinds due to the elections in April, and heat wave conditions in some of the -- some parts of the country, Sterling has been able to deliver a growth of 9% to 10% in its revenues in the quarter 1 over the previous years. With the addition of 2 resorts, 1 in Dehradun and the other in Udaipur during the quarter. I'm happy to inform you all that now Sterling has reached its first milestone of 50 resorts, hotels and retreats in India.
Just to repeat, about 2 years ago, we were about 30 resorts. And today, we are at 50. Our presence has been strengthened with this expansion with 6 resorts in Rajasthan. Last year same quarter, we had only 1 resort in Rajasthan and now 6 in Uttarakhand. Over the last 12 months, Sterling has added 9 new resorts in its portfolio and many of these resorts are in the ramp phase with seasonality expected to impact from Q3 onwards of this financial year. This includes the 5 resorts that we opened in the last 5 to 6 months, mostly in Rajasthan, which are all in the ramp phase. We did witness a temporary headwind in April because of the elections. And April is a month where we have large conferencing business. And many of these conferencing business blocks have actually moved to the future quarters of this financial year. However, we managed to replace this business with individual holidayers during the months of May and June.
With that, our available room nights actually increased by 9%. The occupancy was stable at 69%, mainly also due to the fact that we have 5 or 6 resorts which are currently in this ramp phase. We had an ARR of, our average room rate, stable at INR 7,100 during the quarter, despite some pressures in occupancy, especially in the month of April. However, the growth in nonmember room nights by 12% over last year and coupled with the growth of -- in F&B of about 6% to 7%, resulted in an overall growth of 9% to 10% in its revenue.
In line with our rapid expansion geographically and with robust pipeline of contracted inventories on an asset-light model, the company is also investing in building key talent to cater to this growth. We have a total of 20 new resorts that could -- that is in lineup to be added on to our portfolio, which is currently at 50 and a growth of 40 over the next 12 to 18 months or 1,000 keys maybe counted. And this will start coming in phases on a monthly basis. We continue to remain debt-free with a healthy cash reserve of about INR 2,000 million.
At this point, I would like to also reiterate that Sterling continues its transformation journey -- trajectory towards hospitality, having completely sunset the acquisition of long-term membership products from July 2023. Hence, the brand is growing aggressively using this combination of asset light and low capital-intensive models for its expansion. And as mentioned, we have a strong pipeline of 20 resorts and over 1,000 keys to be launched in the next 12 to 15 months progressively.
I would also like to state that, we have maintained our profitable streak for 16 consecutive quarters. Our EBITDA stands stable and healthy at 34%. And I will address 2 points, which reflect the slight drop in EBITDA percentage values over last year same time.
One, we have 5 resorts, which we opened in the last 5 months, which are in the ramp phase, and all of them are in Udaipur. At this point in time, as and when the new hotels open, especially in highly competitive markets, we have a little bit of a cost that hits you directly, but the revenue line is a trajectory upwards. So therefore, this will become a force multiplier in Q3 and Q4, number one.
Number two is, with the expansion that we are having of almost 20 resorts and 1,000 keys, it necessitated to actually start inducing and start investing in leadership and manpower little in advance, which is what has happened in the Q1 of this financial year. Just a few other highlights I'd like to mention. One is 19 of our resorts are ranked #1 in our spectrum locations by the Tripadvisor and 65% of our resorts are in top 5. Forty two resorts or about 50 resorts were ranked 2.5 and above out of 5 on Tripadvisor. Sterling Puri was also awarded the Best Resort for Destination Weddings at the second ET MICE & Wedding Tourism Awards 2024.
All this also is a testament of the growing sterling brand in the hospitality space. So going forward, we are -- we expect the long-term demand to continue to grow in the hospitality sector. With many of our new resorts also completing the ramp phase, we will look for a force multiplier from Q3 and Q4. This year is an important year where we will be investing in expanding our portfolio because that's one of the key growth levers for us in the future as well. Thirty resorts, as of 2.5 years ago to 50 resorts today, and we are looking at, at least [ 65% ] of the resorts as we go ahead. So it is an investment phase that is in progress, but the EBITDA will be stable and will be in line, if not the hospitality industry average.
Good morning. This is Ramakrishnan, I'm the CEO and MD of DEI. I would like to take you guys to the quarter and the year. In general, financial year 2025 and quarter 1, in particular, is going to be a challenging, unique, but extremely enriching and rewarding year for DEI in the long run. The quarter that went through, obviously, our revenue had dropped by about 7% from INR 220 crores to INR 206 crores. This is predominantly, as Debasis had mentioned again on -- due to the bad weather that affected UAE, which is one of our primary markets. and substantial contribution comes from there. That was in the month of both May and June. April started and May and then June got a bit better. China also was under a cold wave, which also affected some of our revenue up there, albeit with these 2 major markets having some drops, our supplementary markets, particularly in Singapore, Malaysia, Indonesia, saw some substantial growth about 30% to 35% in revenue.
The quarter also, while comparing with quarter '23, when we compare the quarter-on-quarter last year had Korea and Mauritius in operations, which we have discontinued due to non-profitability. A sizable amount of this revenue also was affected by U.S.A., where we have moved out from nonprofitable businesses and now focusing more on profitable businesses.
All of this over and above has been quadrupled by the fact that we are right now investing into a new technology that's going to go live by the end of this calendar year. And that makes it even more challenging because we have double costs going on with our old technology and the new one. But that's particularly only for this year. The road ahead is pretty strong and solid for us. We've had new businesses nearly about 13-odd partnerships signed for this -- in this quarter alone, which tantamount to about roughly about INR 35 crores of new business. Also, it's also been a very, very unique year, as I mentioned before, because this is a year when more than 70% of our total portfolio is under renewal and the good news is more than 91% of that has been renewed. So overall, that makes us in a very strong position to face with a new technology coming in to maximize everything that comes along.
So in a nutshell, a lower revenue did impact the gross margins. Direct cost, which are more or less fixed in nature also had a slight impact, but that's purely because of the quarter having [indiscernible] that were beyond our control. Having said that, we have also some technology costs that was overlapped. Albeit with all this, we are controlling our indirect cost pretty well, and there has been a sizable benefit of that, that's offsetting the net impact.
With that, I can summarize by saying that we've had a fairly good performance from year-to-date as of 2024 and our balance 6 months are fairly robust enough to cover up what we've been losing on in the interim. Thank you very much.
Steve, you can open the floor for questions and answers.
[Operator Instructions] The first question is from the line of Pratik Banthia from Girik Capital.
Dhaval Shah on this side. Couple of questions. First, on the Travel and related segment. Sir, what was the outbound revenue for the quarter?
Dhaval, it's Mahesh. As I mentioned, that number was INR 610 crores. That's a volume of business that we do, that revenue that you mentioned. And I said in my remarks, because this question had come up last time also on the earnings call. FY '20, the outbound specific total volume was close to INR 2,400 crores. So we are at about INR 610 crores, and that's the 25% reference that I made when I gave my comments [indiscernible].
Okay. So that means domestic was only around INR 14 crores. Is that math right, is also 1682 and I deduct all the other segments, then you are left with domestic or around somewhere. So what was the domestic revenue?
Dhaval, you're missing that out, sorry, I would not do a complete reconciliation here, but there are multiple segments. What I made as a reference to is only the outbound, there is domestic, there is international DMS. There is India DMS, there is MICE, Corporate Travel. So there are multiple segments within the travel. So what I made a reference to is specific to a part of the holidays business and specifically outbound, which is international.
Sorry, I could not hear you say, your voice went blank. Can you repeat?
Maybe I tray and explain that, Debasis here. Can you, first of all, can you hear me? And is my voice loud enough?
Yes, I do not hear Mahesh. I can hear you now, yes.
No issues on that. See the outbound turnover is INR 610 crores for the quarter. Out of the INR 1,682 crores, INR 610 crores came from outbound. The balance came from other parts. For example, very broadly, around INR 600 crores came from the DMS business, India and international. [ Corporate travel ] INR 400-odd crores. INR 425 crores to be precise. And the rest was coming from other parts of the business like corporate ticketing, et cetera, domestic corporate ticketing, et cetera. One thing that you need to keep in mind as far as corporate travel is concerned, we do not, we cannot rather. We are not allowed to account for the total volume of the business that we transact. We can only transact or account for the income that is generated. So as you know, Corporate Travel operates at within 4% and 5% sort of margin. So that's the margin that we actually show in our books as far as the accounting standards, as far as results are concerned. Does that answer your question?
Yes. So sir, my -- so yes, so what lead I get from your answer is that. So what is the absolute domestic number because the domestic travel number is very less, it is only INR 14 crores. Correct?
Domestic travel number is INR 77 crores. I don't know how you are getting INR 14 crores. Maybe we should interact more later on because I'm not sure how you're getting this math.
Yes. No problem, I'll connect with you offline. And so on the outbound, we are at INR 610 crores. And given Q1 is the peak season for us, are we -- is there enough visibility for us to reach our pre-COVID number?
Dhaval, I think, I've mentioned this, and I'll repeat this again. If you look at our volume growth or revenue growth, we grew by about 21% on the holiday side. And within this 21% large amount of growth or close to 30% growth actually came from the short haul and the domestic segment. So the growth on the short haul and domestic has been much larger. Long haul has been a little tepid. I mean, we've grown at about 14%, 15% on the long-haul side. And there are multiple reasons. And as we alluded to the same one last time around, we saw the impact of elections. There are warmer summers in Europe.
So people have either taken a decision to postpone or maybe moved to other destinations or rather short haul destinations. That's a trend we are witnessing. So I think the entire playbook around long haul may get rewritten as we complete the current season. And also to mention here, if I look at my forward booking, getting into the next 2 quarters, it actually reflects that the long-haul side will move more towards the winter and the short haul and others still continue to run in the September quarter. So that's the kind of growth rate that we're seeing. And we believe that we should be closer to the FY '20 numbers as far as the overall holiday portfolio is concerned.
I think there will be some change in the mix -- but the overall portfolio, we remain confident that we should get closer to that number in the current year. Okay.
And sir, on the ForEx side, why has there been no growth? I understand the two reasons which are mentioned. So one is the Hajj movement. So does it mean that last year and this year, the number of Indians going for Hajj is less or something?
Or -- and the second is that the Bangalore International Airport operations, we have shut down. But at the same time, we have given several press release with regards to opening new outlets in several cities. So that -- so those new outlets, the number is far higher compared to one shop which we have shut down at Bangalore International Airport. So I can't understand that why the revenue is flat. And at the same time, our travel business has grown. So anyway, so people who go for tour with Thomas Cook, they should ideally be buying the ForEx out of Thomas Cook. So can you just explain this flat number of ForEx revenue?
Let me try and give a perspective to it, Dhaval. First and foremost, if you compare last year to this year, it's looking flattish. And the specific reason for it are the 2 that you mentioned First is the impact of BIAL. In terms of revenue and designation, we only recognized the gross margins or the gross revenue that we make here. That number is close to INR 5 crores. Last year, that INR 5 crore does not sit in the current year. So that's the top line. But if you look at the profitability, which is defined as EBIT, actually, it has grown by 10%.
So which means it only says that INR 5 crores that sat in the revenue is going -- is getting compensated by some other segment that grew and that growth has come from the retail segment. And in the retail segment, there's digital, there is the prepaid card and the new stores that we have opened. The other impact is on account of Hajj. Last year, we did close to about INR 400-odd crores of volume on the Hajj. This year, the volume was close to about INR 300 crores. This is also the lower number of people that have been allocated. You will understand, it's a subsidy that the government gives for these travel and the number of passengers allocated this year was much lower. So that impact sits in the current quarter.
But it's also important to highlight here. And this we have been talking for multiple quarters now. The FX business has transcended into a model, which is more prepaid card driven. Currently close to about 30% of my portfolio is on the prepaid card on the retail side. And on the [ prepaid ] side, it's still higher, it's close to 80%, 85%. Now when you look at it, float becomes an important element of this business, the interest that I get on these floats necessarily do not sit at the EBIT level. So if I add a delta between what I got last year to what I see this time, the incremental amount is double. That's roughly about INR 6 crores. So if I add INR 6 crores to that revenue, you will actually see that my profitability has grown close to 20%.
So that's in reality, the reconciliation as to why you see the numbers like this. I will reassure you here that business is growing, the growth both in terms of segments within retail, which is holiday grew by about 10%, the student market continues to grow at about 21%, prepaid portfolio grew at 13% and volumes and the attachment rates are actually going up.
Got it. Also from getting a perspective on this year and next year, like in several of our past conversations, what we understood is that financial services, we should assume 10%, 12%, 15% kind of growth. So now if you see last 3 quarters, the ForEx business has, on a year-on-year basis has not grown. So now how should we understand the revenue and EBIT growth for next 2 years? What is the nature of this business.
So Dhaval, I think you should keep your eyes to the profitability in this business, which is EBIT. And obviously, part of that sits in other revenue, which is the interest income for this business. I think the profitability of the business will continue to grow. I also mentioned the expansion in margins that happened. If you look at the EBIT margins, they have expanded from close to 44%, 45% to about 52%. That's an exception that in that sense. We have guided the market to more like 45%.
From a revenue point of view, I'll still guide the market to a 10%, 12% growth on the ForEx revenue side. You have to adjust for onetime events that happen. I mean having said that, Bangalore Airport went out last September 2023. I'm also making a mention here that we've got the contract again, albeit we're going to share it with somebody else, but that income will come when the airport operations get operationalized, which we expect will be Q3 of FY '25. So some of these vagaries in business will keep happening. Our existing investment and distributions have actually started to play. And you must appreciate the fact that in ForEx, most of the new locations that we opened either breakeven or make money in the first year itself.
Got it. And sir, last question. Sir, we are hearing that Fairfax is bidding for IDBI in the newspaper. Is there a possibility that there could be an OFS to fund some of the acquisition money required?
[ Pratik ], first of all, we don't comment on rumors or speculation. This is entirely in the realm of speculation. So I don't think we're even going to answer your question.
The next question is from the line of Deepak Lalwani from Unifi Capital.
Sir, my first question was on the long-haul recovery. So in the seasonally strong quarter of Q1, I understand there were elections, people traveled less and the environment was soft in terms of demand. But you've indicated that this Q1 season is somewhat getting pushed to July, August as well. So can you just throw some light on the current quarter in terms of bookings that was -- and the reasonable assumption that you're making for the full year for a full recovery, should it be from the Q2 or you are banking on the winter demand [indiscernible].
Depaak. Again, Mahesh. If you look at the long-haul recovery, as I said, we will -- see where total long-haul recovery as far as the overall holiday portfolio is concerned, but there will be a change in the mix. As we see the trend, the long haul is a little softer. They are growing -- while they are growing double digits, but they are in the early teens. Whereas if you look at the short haul and domestic, they are actually growing in high double digits. And obviously, reasons are quite obvious, if you look at the short-haul destinations, people are preferring visa-free, easy visa destinations, which they can hop on tomorrow and get onto a flight and go without having to worry about how easily they can get the visa.
On the long-haul side, getting a Schengen Visa is still a problem. I'm not saying the rejection rates are high or any of that sort. But people have to wait through while there was an announcement to say the visa for a 2-year, 3-year and 5-year regime is going to come, but I think all of them will take some time to play out. It just happened in the beginning of April. So it's going to take some time to play out. In the U.S., there is still a wait period for the visas to come. So I think we expect the recovery on the long haul to come. There will be growth on the long haul. Will it match what it did in FY '20? I'm -- a little too early to predict that. We've seen a little softness on the long-haul side. But I think, it will be well compensated by the short-haul and the domestic side of the business.
So overall, at a portfolio level, we definitely will be closer to what we did in FY '20. It's also important to note that if you look at our margin, the long haul, let's put it this way. The short haul and the domestic will be a better margin yield for us. And the expansion that you saw even in the current quarter where we moved from 3.4% to 3.8% is led by the increased volume and value, both on the domestic and the short-haul side. So I think it does work in our favor. But yes, clearly, we don't want to be not present in that market. So yes, that's the way we look at it.
Okay. Understood. And sir, coming to the Sterling business. Again, you had a similar phenomena in terms of occupancy because of election [indiscernible] but an additional reason cited there was the muted wedding sales and the conferencing business. So can you please indicate what's the share of wedding-related business and the conferencing business in that revenue piece?
Deepak Lalwani, this is Vikram Lalvani here. So let me just elaborate on both these aspects. For example, last year, in April, we did approximately about -- I'm talking about the conferencing business right now. We did approximately about 15,000 room nights on conferencing. And this year it dropped by 15% to approximately about 12,000 mainly in April, that's when you have the capacities to take on conferencing. Most of the companies are starting new financial years. So that's why we tend to do the meetings in the month of April, which actually did impact by about 15% because of the impact of elections. Tamil Nadu went for election on April 19 and it was a very highly phased out election. But we managed to substitute that with individual FIT holiday goers because of the summer season having kicked in and we leveraged our portfolio in the hills for that. That's number one, in terms of meetings and conferences.
Number two, in terms of wedding. Wedding, let me tell you, two parts to it. Last year, in quarter 1, we had 23 Saya dates or auspicious dates. This year, we had only 3. Last year, we did a total wedding share of business of approximately INR 2 crores. And this year, we did it -- we had approximately only INR 50 lakhs. So that is the drop that has happened in the wedding business. Now, having said that, a large portion of my portfolio has been ramped up in Rajasthan, which was not there last year in quarter 1.
In Rajasthan, we had 5 new resorts in Rajasthan in quarter 1 this year, which was not there in quarter 1 last year. Rajasthan is a huge market for weddings, especially Udaipur, Pushkar. They are huge markets for weddings. So therefore that also slowed down our ramp in Rajasthan. So we were expecting a wedding business to actually be far bigger in terms of a pie because of the expansion in Rajasthan. But having said that, let me tell you that the Saya dates actually in Q3 and Q4, I am giving you the positive now. In Q3 and Q4 is up by 12 days over last year. Last year was about 41 days of the Saya wedding days and this time it's about 41 plus 12. So therefore many of them are actually coming in Q3 and Q4. And by then, we would complete the ramp phase in Udaipur as well. So which is where our wedding market is expanding. And that's why Rajasthan was actually critical for us. So this is how the wedding and the MICE business actually played out in quarter 1 when compared to what it was earlier.
In terms of the component of business, one is, as I said, January [ 2015 ], about say, is about 40% of our overall room revenues comes actually from meetings and conferences. So that portion declined, but we managed to substitute that. But in the Weddings which got affected in Rajasthan, especially, so that's where we -- the ramp hence, was slower in Rajasthan in Quarter 1. I hope I answered your question, Dipan.
Yes, sir, I had another question in Sterling. So the Wedding -- this Conferencing business, which is 40% of your revenue piece. So is that sort of getting shifted to the next few quarters? Or is that a business which possibly won't come back? And the second part question is on the margin guide because you are ramping up and putting up a lot of inventory, the expectation that we should have in terms of margins because we are at ramping up stage. Should be on the lower side Y-o-Y? So these are the 2 questions.
Okay. So, the first question, if I remember that was a MICE. Now there are some companies, especially in the pharma sector, they have pushed it out. They do come back in Q3, they will come back in Q3. But having said that, in Q2, Q3, and Q4, we would even generate new business. So that component overall, from your perspective, should not get impacted. In fact, we see expanded inventory, it could impact growth.
So why is the component when the share of the pie would be about 35% to 40%, but the overall quantum wise, it will grow in the subsequent quarters because of the fact that even our inventory size is growing, number one. So that's a big growth driver. Yes. Sorry, your second question was on -- if I remember...
On the overall margins for the Sterling business.
Okay. So yes, this is, as you said, we are, in fact, expanding our portfolio. And in fact, it will be -- we're expanding it almost 40% of what it is today. But having said that, yes, you will have -- so I'm considering this year as an investment year, but I will -- we will still hold the margins between 33% to 37% -- and through the entire period, irrespective of these ramps that's happening, and that's a very, very healthy stable EBITDA. I would say that impact that probably in line, if not ahead of many of the other hospitality brands business.
Okay. Okay. Understood. And sir, my last question was to the CFO, sir, what should be the tax rate that we should assume for the full year because you had indicated...
Yes. So I think going forward, we can consider a tax rate of about 30% for the group. Obviously, different [ register ] different rates of tax. But as you've seen, all businesses have now started coming back into profitability. So the taxes that overall will start rising. So you can take it about 30% from now on.
Sure, sir. Sir, because in the previous quarter, we had clearly indicated that our tax rate should be around 22%, which we did in the full year of FY '24. So what has led to this increase in tax rate? And I was assuming that we had tax losses in the DMS entities in the Sterling business. So this sharp increase in tax rate for this year was sort of...
Okay. You -- okay, maybe we are not very clear at that matter. 22%, obviously, is not a sustainable rate of tax even that the rate of tax in India is minimum of 25%, which is there for some of the companies. And Thomas Cook is still already because it's got [indiscernible], et cetera, which need to be utilized over the next couple of years. So 22% is not sustainable. In addition, of course, you all know that the companies have started paying that from the last financial -- from this financial year -- actually from July onwards, so on this low rate of tax, it does eat into the overall price.
In addition, as far as Sterling is concerned, Sterling, there are -- we are probably looking only at the deferred tax asset part of it. There are 2 parts to this. One part, of course, is a deferred tax asset, which has created our losses, which is getting [ eaten away ] as the company earns more and more profits, which is actually a very good thing. But there are also what we call deferred tax liabilities, which is created on 2 things, on the valuation of the land that Sterling has and know that it had substantial amount of land. And that as a tactic we revalue that every 3 years. And every time we do that, a deferred tax liability also goes up.
There is also -- there is a technical part in this. It's a deferred tax liability on the difference in depreciation between the company's rate and income tax rate. Now might sound complicated, but the long and short of it is that the deferred tax liabilities have started growing, okay? The deferred tax assets are shrinking. And therefore, the differences between the 2, which is about INR 6.5 crores -- INR 6.5 crores this quarter has come and hit the PAT line. But it should not be a concern because growth in PBT is what we aim for. Tax is something that the finance minister decides, we don't decide. I think we should target the PBT growth in the PBT, the PAT would happen. If the growth in PBT happens, the PAT will also happen.
Sure. And the second I wanted to clarify from you is that the last year in Q3, you had a one-off other income, right? So can you just quantify that? And what was it relating to and any possibility of it repeating again?
I can't offline recall that what you are referring to. But let me -- where we connect offline because last year is a long way -- is far off of our -- it's more -- anything more than 3 months is nowadays gets [indiscernible]. So anyway, we'll...
Of course, we'll connect offline.
That's how we can talk about it.
The next question is from the line of Prolin Nandu from Edelweiss.
A few questions from my side. On your ForEx business, apart from the retail and wholesale mix, what is the reason behind such volatility in margins, quarter on a quarter-on-quarter basis?
So I think that there's no other specific reason for volatility in margins because what happens is we look at in April, June quarter, and I think a reference was made by the previous participant, where he asked this about the peak travel season. So when you are in a peak travel season, your retail volumes will actually go up and your wholesale volumes will come down. And when your retail actually goes up, the margins on the retail are higher as compared to margins on the wholesale, typically the wholesale margins are 1/3 of what we do on the retail side.
So higher retail margin will drop down straight to the EBIT margins, and that's exactly what is happening because there are no incremental costs that we are associating with that because the factory is created, capacity is there. We're just running the volume through it.
Sure. So that would be the only reason, right? Nothing else?
Yes.
Yes. And sir, second question is on Travel, the second segment. Now I'll tell you where the confusion is coming from most of the participants. If you look at your last year's Q1 FY '24 presentation, there's the segment breakup is based on growth and there you also include domestic, for example, right? So I mean, my position would be, could you be please consistent with the subsegment in terms of either growth or breakup when you probably see the press release because in large -- there is a mention of domestic holiday in Q1 last year's presentation, which is not there also. So that makes a comparison challenging for us. So that's one suggestion.
But Mahesh, on the part of the outbound travel, right? I mean, forget about long haul and short haul, right, because there's a lot of confusion there, you mentioned you reached INR 610 crores, and you are aiming for INR 2,400 crores, right, which is the FY '20 number. Now obviously, if I look at the outbound gravel and the seasonality there, at least 43% to 45% of your annual outbound travel used to be contributed by first quarter. And this is in FY '19 and FY '20 numbers that I'm looking at.
So this time, when you said that you are already there at 25%. Is there a change in seasonality that we are witnessing? Is that the case?
Prolin, as we mentioned, we've actually started to see that, which is what I said in my remarks also, one impact of election, severe summers in Europe and stuff like that has impacted, and we are seeing a longish kind of a trend for people to travel. Also what's happening is we're not only just focused on long-haul. We are also talking that the short-haul growth is much faster. We are actually seeing the short-haul. That also sits on the holidays -- international holiday side of it. That portfolio is growing at 10%.
So what is happening is there's a shift that is happening, and we also make better margins on the short-haul side of it. So I'll qualify here, we're saying that the overall volumes on international will mirror closer to what we saw in FY 2020. And the mix within that may change between long-haul and short-haul. The recovery on short-haul or the growth on short-haul will be much faster, much bigger as compared to long-haul. It's also important to highlight here that when you look at input costs between 2020 and 2025, they are very different, input costs have gone up.
From a volume catch-up point of view, which is a number of passengers, that one unit of measurement to we still have a long way to go. So there is so much more in the market for us to do. Currently, we are well be talking at a value perspective. And I think the value has actually gone up. So we will -- we are quite optimistic that we should be very close to the 2020 numbers.
Okay. So again, 2020 number is INR 2,400 crores. Am I correct? That number we should be close to, right?
Correct.
Okay. Right. And so my understanding was that long-haul is more profitable. Is that not the case? Short-haul is more profitable than long-haul?
Well, let's put it this way, both of them run at a gross margin range -- ranges between 14% to 16%. But again, what happens is if you look at the short-haul, we got the benefit. There was a lot of demand coming in. We operated charters, we had demand, I mean from a new geography like Japan, where our volumes actually grew 2x. So sometimes when there is demand and then people are all moving in one direction, you will appreciate that during the pandemic Maldives was a sought after place. And it was selling at a premium. Maybe that's not the case today.
So yes, when the market undergoing is good, you also get an opportunity to see some margins. So we are seeing better realization this time around on the short-haul and on the domestic also. But yes, more or less, you can take the point that it will be -- the business operates at about a 15% gross margin.
But before this short-term thing, long-haul used to be more profitable, right? When we used to do the INR 2,400 crores somewhere?
Margin perspective, long-haul from a share size perspective because if you multiply the margin with the volumes that we do on the long-haul, that will look like a larger chunk of our revenue, as compared to short-haul domestic.
Okay. So no, I'm talking about percentage margins, but let's leave it at that...
Nothing much to choose between the 2.
6 Right, right. Okay. Understood. Now lastly, on your Sterling business, right? Again, I'm a bit confused on your calling out that you opened 5 resorts in the last 5 months. Now if I do a quarter-to-quarter comparison, last year also in Q1, you opened 2 resorts, right, Shimla and Panchgani. So is there something specific in terms of the teams that we added or the average CapEx that we have done for these 2 resorts that we are adding with this quarter, which is higher than the average that we spend on any resort, which is creating a drag? Or is there something else? Because we have been opening these 2, 3 resorts in a quarter every time most of the years. So anything specific that you want to call out that is different in this quarter versus in the past quarter?
Okay. Let me clarify that, as and when we -- growing our portfolio. Let me give you -- I mentioned this earlier, and I'll mention this again, as a first step from an intent point of view because, one, this is -- this is a growth way for us, number one, for the company. Number two, if you see even in COVID all during the period of COVID what actually put a lot of risk on the company, was that the company was highly dependent on only one season, which was the summer season where almost 40% or 50% of its revenues would come only from those 2 or 3 months.
And during COVID, those 2 or 3 months -- I mean COVID [ shifts to those ] 2 or 3 months, it, in fact, impacted the entire company for the year. So from a strategic standpoint, we needed to derisk our presence only in the [ base ] and start widening our presence across various holiday types. So that's the -- that was [ the intent ].
Number three, the focus of expansion has always been leading an asset-right model. And no CapEx model or a low CapEx model. So while we have our own lands as well, we have yet not taken our decision as to when we are going to use CapEx to build our routes. So therefore, what we are doing is we are actually partnering the expansion that's happening with various owners. Now the partnership can happen in 2 parts.
Number one, it can happen in form of -- I will define it very simple. What is your P&L-related hotels? And what is your commission-related hotels? When you're going in for a management contract, typically, these are commission-related hotels. That means based on the top line and the bottom line results of that particular hotel, you are actually in charge of the operation, Sterling is in charge of the operation of the hotel.
Generally, Sterling is responsible for business [indiscernible] of the hotel. But the P&L is in the owners' books. So we are managing the entire property for the owner. So in that case, our CapEx is completely 0. Owner build the inventory for us and for aspect, what's the Sterling get out of it is Sterlings makes a certain percentage at the top line or in percentage of the bottom line, right? So that's one.
Number 2 is, the second model is the P&L-related model. The P&L-related model is where you're building your own inventory, your own CapEx. That's something that we've not got it to us yet. Number two, it could be on a small fixed lease or it could be on a variable lease which is a revenue share. In both these cases, the P&L is in your books.
So having said that, we've been incrementally adding resorts into our portfolio, depending on 2 things. One is the destination and the importance of the destination. And number two, when the project is also complete, when the project starts getting complete is where we start coming into our pace. Now in terms of number of keys, for example, when we started off last year, as we had indicated, we were approximately 2,100 keys.
Now today, after all the expansion that we've done 8 or 9 resort, we are currently above 2,700 keys. So to that extent, there are a number -- in terms of number of keys has gone up. In terms of number of resorts, it's gone up to 50. In terms of number of destinations that we have presented is now 45. In terms of the portfolio that we have, we have a far wider spread holiday-type portfolio.
Part from hills, beaches, river sites, heritage, culture and pilgramage and jungles as well, which where we also have become very strong. So what has happened is over a figure of this 2, 2.5 years and incrementally, we are adding it on every quarter is to expand our portfolio and is to derisk our portfolio for being very present and very strong only in one holiday type and not present in any other holiday type.
I'll give you another example of Rajasthan, when we are enough focused on expansion, we've been a key leisure hospitality player. We could not be presented that, right? And Rajasthan is a big market for weddings and et cetera. So therefore, there is a conscious effort to actually build your destination with presence in various states, which have a very strong mutual component of business.
So therefore, we had 1 result of Rajasthan probably a year ago exactly. And now today, we have 6. Our next focus of expansion is Karnatika. So we're going to be launching Badami very soon. That's on a managed model. We will be launching Sakleshpur very soon, we acquired area by area and actually stating our presence, based on where the potential is and based on where the market demand we could actually buy it there. Does that answer your question?
Actually, it does not, but I'll take that offline, right? So let me ask the second question again on the Sterling business. Now food and beverage has grown at a slower pace than your overall top line revenue as well. And I remember you had mentioned in the past calls that you have got the bar license only in the last 1 year, right? And sometimes you have been applying a few places and then got the bar license there. Now in terms of your FY '24 revenue, it was close to 15% of overall revenue, right, food and beverage, 14.8% to be precise. And we know that this is a high margin kind of business, right, versus an overall business margin. So where should we look, what proportion of our overall revenue will eventually come from food and beverage? And why is it a lower growth and even the top line growth right in this quarter?
Okay. Let me just clarify one thing. See, food and beverage in terms of margins, what actually drives the profitability in our Resort business, frankly, is the room revenue. Because the fixed costs are something there, but the marginal cost of selling an incremental rule is not that high. In terms of properties and beverage, food and beverage are actually the typical direct gross margins be about 60%, right? But if you have to take the direct or the indirect cost to it, like salary wages, heat/light/power, et cetera, it would be in the range of 20% to 25% in terms of margins.
So [indiscernible] rooms will drive the overall margin to a large extent. Number two, food and beverage is a critical component, especially in the leisure business. That's -- you're right. You're absolutely right on that. The total contribution on food and beverage, if you say in a base of say [ 100% ], food and beverage is 25%. Is there an opportunity to increase that size of the pie? Absolutely, there's an increase -- to increase the size of the pie.
Also, let me tell you that weddings is a large component that actually drive [ growth ]. And we had a muted wedding season this year -- this quarter. So typically, we grew 6% with, as I said, 5 or 6 hotels ramping up, if I had to eliminate those 5 or 6 as we've actually grown at 11% to 12%.
Is there an opportunity there? Yes, there is further opportunity there. And hence, the way we actually approach it food and beverage business, is more towards an experience kind of food and beverage business, those margins will eventually be higher. So a lot of work is going on in that aspect. And it is a critical component, but rooms is the ones that drive [ opportunity ].
Sure. So when do you target that 20% of overall revenue, should it be in a year's time or 2 years' time? Because we are at 15% right now?
I'm sorry, but I think there are a lot of questions still pending, we have a long list and we have hard stop at 12:30. In the interest of time, may I request that each person ask really 1 question because otherwise, I think a lot of people will not get a chance to ask any question. And any questions that you may have, we can always come back to you either you can order come back to us Prolin, and we can answer you. I'm doing this in the interest of time. Thank you very much.
The next question is from the line of Himanshu Nayyar from Systematic.
So just one bit on the ForEx first, I mean, Mahesh can update us on the RBI discussion paper, which talked about the consolidation of money changers and allowing you guys to do business transactions. So what's the update on that?
Nothing, Himanshu. We haven't heard anything back from the regulator. I think it's still work in progress. We believe from some of the other circulars that have come out, I think there is a method in the [ bank ] that I would say, but very difficult to call out at this point as to how the regulatory is thinking about it. But active discussions are happening. We have participated in some conversations with them. But no concrete policy decision has been made on this at this point in time.
Understood. And just one small bit, if I may. I mean, any thoughts on which the management has deliberated on your capital allocation plans in the medium term, given the limited CapEx requirement that we have and the increasing amount of cash that is now expected to be there on the books going forward next couple of years?
So Himanshu, as we've said, our cash is not completely fungible in that sense because it. And it's also because this is also the funds coming from BPC, yes. So the free on that book will be roughly about INR 250 crores INR 300 crores that we have.
And clearly, we've been guiding this and we're beating this again. currently, we are focused on keeping the cash on the balance sheet. Business is going back, stabilizing. We've been seeing 4 or 5 quarters of good profitability, and we continue to build on it. At this point in time, there are no active conversations, no plans on any capital allocation at this point in time. As and when we are ready for any conversation, markets will reinform the target.
The next question is from the line of Jigar Jani from BNK Securities.
Just one question on the Domestic Leisure segment, if I look at the numbers for FY '20, I think full year, we said about INR 110 crores in this quarter [indiscernible] are at about INR 77 crores currently. So do you foresee that there will be a considerable contribution from Domestic in the overall recovery? Because if you're looking at FY '25, we are saying outbound at INR 2,400 crores full recovery and we have [ INR 174 ] crores in the Domestic in this quarter. Do we expect second half to e significantly stronger for the Leisure segment overall?
So Jigar, as I said, our growth on the Domestic side, even in the quarter that went by has been very strong. Our forward bookings also reflect similar trends. You would appreciate the fact that in the domestic, the conversion cycle is much shorter. People make decisions very quickly. So clearly, the trend is very positive.
Well, there will be events that will impact like a rain or a natural calamity happening either in Uttarakhand or maybe for that matter Kerala. We'll see if some of the impact in the short to medium run. But clearly, there is a lot of demand that's coming. And I think the government has also announced a [ series ] of measures in the budget, which focuses on pilgrimage and spiritual tourism.
So I think -- so domestic as a market is likely to grow, and we are seeing that growth even in our portfolio. And we believe the double-digit growth on this business is here to stay. It will trend obviously much higher than what we did in FY 2020. And as I said, there will be a shift in pockets. The mix of the business will change. Short-haul and Domestic will become larger or rather will start playing a larger -- will be a larger part of the pie as compared to long-haul, and that's the changing trend of the business.
Right. And just to follow up very quickly. When you say 100% recovery, you guide for the entire Leisure segment, as a whole or just for [ outbound ].
We're talking about the overall holiday business. So we look at short-haul, long-haul and Domestic. This is the overall portfolio that we're looking at. So we expect and honestly, to be frank, look, we don't want to dissect this because at the end of the day, the customer is a holiday seeker, and that's how we look at it. We are experienced providers, whether he's coming from a domestic short-haul or long haul, we want to give a great experience and come back and repeat that holiday with us, that's what we are focused on.
Sure. And just 2 very quick bookkeeping questions the FTI impact...
Could you please call back in the question queue for further questions. The next question is from the line of [ Mayur ] from Wealth Managers.
Little longish commentary before I go to the question and my sincere apologies if this is a question not to be asked on the phone call, but it's a little strategic question. I hope some color on that. The company is quite diversified in terms of various segments within that, each segment has got various levers, various aspects, whether it is travel, whether it is forex, whether it is Sterling even in each of them, and we as analysts and fund managers are continuously focusing on the subsegments and segments and quarterly movements.
I wanted to understand how does the management look at your overall strategic intent in terms of the overall travel and tourism space for the company? And can you guide us for instead of yearly, can you look at -- can you tell us what is the 3- to 5-year vision from an overall perspective because if we get lost into the -- in some quarters, something is moving in some quarters, something else is moving. So in terms of overall, where do we stand in terms of the overall 3- to 5-year vision? And does the management look at as the company has an integrated play? Or is it also looking at various subsegments, which I understand accounting and legal aspects of risk and how do you do the segmentation. But at a strategic level do you see as an integrated play and that is what you should encourage us to see? And how do you see that 3 to 5 years? That's it.
Okay. Madhavan Menon here. I think let me try and take a stab at that and then I'll get Mahesh to come in. I think the vision very clearly is to -- while we have diversified businesses, we clearly see overlapping opportunities across businesses. And when I say across businesses, essentially, it is to focus on -- if I use the example of holidays and foreign exchange. Clearly, there is an opportunity for the foreign exchange business, as the Hoilday business grows.
Now be it short -- what we call short international travel, let me just classify that as international travel. If we look at Sterling Holiday resorts, an expansion that they undertake. It represents an opportunity to both Thomas Cook and SOTC as far as their domestic holiday business goes. If I look at the destination management businesses, then the outbound businesses out of India as well as the MICE businesses out of India, clearly offer an opportunity for our destination management businesses to integrate that business.
While we don't come out and set targets for each of these businesses to integrate with each other. The reality is that is the priority. That is what we are continuously driving. Now it may not be evident from the data that we shared with you for -- obviously, for various reasons. The reality is, it is -- business needs to be integrated as far as possible while maintaining alignment with the laws in terms of arm's length in terms of this.
And you'll appreciate that we are governed by laws, and we have to therefore protect that. We have ensured that each business that is going to provide a service to another business within the company has got a first right of refusal if it believes that the margins do not meet their requirements. So there are multiple movements that happen at a strategic level, but that is our focus area.
Obviously, there are markets where we don't have our own group companies. But again, here, we will try and see how, for example, Thomas Cook and SOTC. The integration of the back end was to give us the benefit of purchasing. The integration of the back end was to give us greater benefits as far as hotels as well as transport is concerned because we push our entire volume through identical hotels. We use coaches that carry customers.
So there is this constant process that is going on, and each of the MDs are focused on how they work with each other. Again, Sterling, if you look at it, as Sterling has expanded its footprint around the country, both Thomas Cook and SOTC had been trying to do more and more room nights through the Sterling business. And this will continue. Now it has taken us time primarily because each is a profit center by itself, and therefore, they need to look after their interest while simultaneously trying to align themselves across our business. Manish, you want to add?
I think Madhavan, you covered it all. I think it's just an additional point I'll mention here is that, look, in the 3- to 5-year horizon, we are an experience provider, we are not component sellers. Our focus will remain on package holidays and creating that memorable experience for the customer. And that core is never going to change. We'll remain true to that.
Sir, we are very used to having tangible targets as our benchmark everything for 3 to 5 years yes?
Sorry, we can't give you guidance on that. That's the policy of the group. I'm unable to give you guidance that far out. But if you do want to interact with us both at a group level or a unit level and get a further in-depth understanding, we'd be glad to give it to you.
The next question is from the line of Andre Purushottam from Cogito.
Now you know what has happened is that I see some parts of the business doing well, other parts of the business doing relatively poorer. So in the travel and business, for example, you've highlighted several destinations that have grown by more than 26%, but there must have been destinations also that have grown much less than that because your overall is 15%. When your Digi business degrew, your foreign exchange business was flat. So we are going to -- seem to be going -- are we going through a transitional phase with some of the business are pulling northwards and some are pulling southwards?
And do you see a change in the climate that all the businesses will move in a fashion that actually gives a mix for much higher growth rate overall? So this is somewhat related to the question that was previously asked from the previous participant, where we can look for growth which are much higher than what we've achieved in the recent past.
And are there some underlying trends such as use of the unblocking of long-haul, the long-haul opportunity or any other opportunities that you see in terms of key mega trends relevance on your business that might enable that process of much higher growth than what you've achieved right now?
Okay. Thank you for the question. This is Debasis here, and I'll try to answer this question. So I think probably you're only reading a little too much into one quarter event. As you know, our business is highly seasonal. And we have always mentioned that, that one quarter doesn't make or break the business. If we need to look at it as a 12-month period to get the rights -- in a [ seasonality ] case. That's number one.
As far as some businesses is going northwards and some business is going southwards. I do not see any business is growing southwards at all. As probably you're referring to Sterling, when you say our business is going southwards, but as I think Vikram time and again explained, during the last 1 hour or so, that seasoning [indiscernible]. First of all the business has got impacted because of certain climate conditions and elections and things like that.
And the other thing, which is the bigger thing is that seasoning is an investment phase. And this [indiscernible] here where the results will be preparing for the next year because it will get impacted by that. But once this investment phase is over, obviously, the benefits of that will come into play. As far as your question on some destinations, yes, some distributions show 20% growth and there are destinations that don't, say, for example, the easiest example, which all of us know about the Maldives, right? We have in the last 3 years or so post COVID, Maldives has drawn exceptional number of people. It has been all over the franchises. But this year, post one particular incident, the traffic has virtually gone down to zero, not completely but virtually zero.
Okay. If I take the Middle East, the weather conditions this year, both in the first quarter as well as -- rather, both in the Jan-March quarter as well as the April-June quarter, have stopped people or sort of people have stopped going there or reduced their trips there because the weather conditions have not been favorable. People have been affected by that. And so there is a drop. And therefore, the rise that you've seen in some destinations probably also because of the fall in other destinations.
As an example of this is Vietnam. You see a huge growth in Vietnam, this year. And obviously, as external summary as well Thailand. So this will continue to happen. We should not try to read too much in individual destinations. We would -- I think what we should look at is the overall growth of the business rather than getting into individual destinations. And that's how we also look at it.
So perhaps, you were listed a little bit by my southward comment, but my comment was between businesses, which are in good growth and just showing margin right? So do we have -- so for example, are there any long-term things that you see in terms of even revival of the long-haul part of the business or in terms of ease of restriction of visa travel such as Schengen, et cetera, that might enable the long-haul business to flourish? Is something that we can look forward to in a 6- to 12-month horizon that will lead us to believe that will benefit almost all aspects of our business.
Yes, maybe Menon sir will just answer your question on the...
Sure. I think the way to look at it, if you look at the travel portfolio, see first, you must understand that we are a diversified group, and we've got 4 lines of business within that. Each one of it, as Debasis rightly said, will go through some impact at some point in time. And in this specific case you look at maybe 2 businesses going through it. But from the real meat of the business or the mode of the business, as we would call it to be, I think we've said that, look, the recovery on the holiday side is still sub par. When I say recovery, sub par is purely because volume growth have not come in.
The number of passengers travelling in some of the long-haul destinations are nowhere closer to what they used to do in 2020, but that's got filled up by short-haul and domestic and stuff like that. So will the long-haul recovery help, of course, it will help. It will bring more passengers to us, bring more volumes to us. But I think what we would like to mention here, and that's the way we look at it is that the more customers who come into the domestic are the ones who will stay with us for a longer period in time. The long-hauls are more mature customers who have done maybe 2 domestic trip with us, 1 or 2 short-hauls. And then that's how they go to long-haul because long-haul typically happens to be a little more expensive from a price point also.
So clearly, I think I would look at domestic as [indiscernible], have a wider net for them and then build on that portfolio and get them as repeat customers. So I would think there is so much more in this business for us to grow. And specific to some businesses where we haven't had a good thing. I think it's just a temporary phase that we are going to -- we are either an investment or expansion or there are these double-dip as Ram in DEI mentioned, there are some double dip that's happening because of investment in technology and stuff like that and some challenges with weather.
But I don't think we should read more into for 1 quarter, rather focus on the long-term trajectory for the business.
But are you seeing green shoots of recovery of the business to the whole, that to my question.
Yes, of course. And I think I've been talking about it so as Ram and Vikram, all of us have been talking about that. We are seeing that. I mean, it's not green shoots. They're already much, much bigger plant at this point in time, and we are only trying to reap benefits. And what we are trying to do is plant new strategies so that the growth rate continues.
Thank you. Ladies and gentlemen, that was the last question for today's conference call. I would now like to hand the conference over to the management for their closing comments.
First of all, I just want to apologize to a couple of people who didn't get to ask their questions. I would request them to approach Urvashi and Debasis and we'll answer the questions. I think I just want to quickly round up what is being discussed today. I think a point that both Vikram and Debasis had explained at length, is that we are in an expansion investment mode at Sterling and to some extent, at DEI.
Therefore, looking at a result of one quarter does not necessarily a reflection of what it is. In terms of margins, I want to reiterate that they have -- we are focused on maintaining stability of our margins. And while there may be opportunities which allow us to grow our margins going forward, we will exercise those options. And I think several of them have been discussed as we go forward.
Productivity benefits from managing costs continue to be our focus, and they will continue to be a focus in the current year. Current run rate will be steady and are expected to continue over the rest of the year. I also expect that the opportunities will appear as we go forward. and we will capitalize on that. So there is potential for upward growth out there. I want to reiterate the diversity of the businesses and the geographical diversity because this is essentially a hedge against any tailwinds.
You'll appreciate that we live in a highly unpredictable world, where geopolitics and the economy -- and economics seem to be mixing at a much higher rate, and therefore, we need to be protective against that. Essentially, I want to say that there is a positive environment in the business. There has been no change in our outlook, and we continue to operate in that environment.
Just as a last point, we are hosting a Capital Markets Day on August 23 at the Geo International Center. If you're interested in participating, all are welcome. Please contact Urvashi to register -- Urvashi Butani to register yourselves. Thank you.
On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.