Thomas Cook (India) Ltd

NSE:THOMASCOOK

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to Thomas Cook India Limited Q4 FY '22 and FY '22 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded.

I now hand over the call to Mr. Akul Broachwala from IIFL Securities. Thank you, and over to you.

[Akul Broachwala, analyst]

Thank you, Hemanth. Ladies and gentlemen, good afternoon, and thank you for joining us on the 4Q FY '22 earnings conference call of Thomas Cook India Limited. I invite the company's senior management team who are here to discuss the results and business strategy. We'll begin the call with opening remarks from Mr. Debasis Nandy, President and Group CFO, followed by the management team. And thereafter, we'll open the call for a Q&A session.

I would now like to hand over the call to Mr. Nandy to take proceedings forward. Thank you, and over to you, sir.

[Debasis Nandy, executive]

Thank you. Thank you, Akul. Good afternoon, ladies and gentlemen. This is Debasis Nandy. I would like to start off by introducing the participants from Thomas Cook as well as from Sterling, Thomas Cook and SOTC Sterling. We have Madhavan Menon, Managing Director, Thomas Cook India Limited; we have Mahesh Iyer, CEO and Executive Director of Thomas Cook India Limited; Vishal Suri, MD of SOTC; I also have Brijesh Modi, CFO of Thomas Cook; I have -- from Sterling, I have Mr. Vikram Lalvani, who's the MD of Sterling; as well as Krishna Kumar, who is the CFO; I also have Urvashi, who runs the Investor Program -- out of Investor Relations Program in Thomas Cook;and Abraham Alapatt, who runs our Marketing Services.

So let me start off. I'll start off and then I'll hand over to Mahesh. So let me start off with the overview of the results. As we have seen, our income from operations for the quarter has moved up from INR 357 crores over INR 522 crores, which is a jump of about 46% on a quarter-on-quarter basis as compared to last year. Our operating EBITDA has moved at a consolidated level has moved into the positive territory, we had a loss of INR 36.1 crores last year, same quarter, and the operating EBITDA now moved to INR 23.9 crores.

While this is operating EBITDA, we had to make some adjustments for certain mark-to-market losses, gains and losses to arrive at EBITDA, and let me take a minute to explain this. We have an employees trust, which had some Quess shares, earmarked only for distribution to the employees. And these are yet line and distributing in the trust. And therefore, since they are likely lying in the trust, we need to make a -- at the end of every quarter, we need to make an assessment of the mark-to-market gains and losses.

As you have seen, the share prices of Quess, like in many other companies, has been very volatile during this period, and that causes changes in our EBITDA. The operating EBITDA gets influenced by that. I'll just give you a single -- simple example to explain that. For quarter 4 last year, FY '21, the mark-to-market gains from Quess shares was INR 20.5 crores and that boosted or rather reduce the losses that we made. Our operating EBITDA, as I mentioned, was INR 36.1 crores losses. The reported losses were 15.6%, and that was primarily due to the gains we made out of Quess. This year, unfortunately the position is reversed. While we made operating EBITDA gain of INR 23.9 crores, the Quess mark-to-market losses were INR 24.7 crores, and therefore, at EBITDA level, we are more or less breakeven.

Moving over to the consolidated results. Our income from operations for the full year went up from INR 795 crores to INR 1,888 crores, that increase of 38%. Our operating EBITDA losses have reduced very sharply by about 54% from last year, INR 275.7 crores of the figure last year and this year decent down INR 127.3 crores. The Quess mark-to-market gains, again, played a role here. Last year, we made a gain of INR 67 crores on Quess mark-to-market gains. And this year, we have actually incurred a loss of about INR 4 crores for the full year. So that has brought down. So our current year EBITDA look depressed because of that fact.

What is -- the important thing that we noted is for this quarter is that this is a quarter when 3 of our companies, there are many companies in the group, that 3 of the companies in the group became profitable. This was the -- these 3 companies are Thomas Cook India Limited, SOTC and our company in East Africa, well tracked for East Africa. These became profitable after the gap of about 7 quarters.

Some other companies in the group continued to do well. Desert Adventures, our limiting Middle East and DEI, which is also headquartered in Dubai, delivered profit -- profitable quarter for the second successive quarter. And Sterling, Sterling continued its profitable run for the sixth successive quarter. During this quarter, we also managed to strengthen our balance sheet substantially. We have -- as you know, we had issued optionally convertible redeemable preference shares amounting to about INR 436 crores last year. During the last quarter, we have converted INR 302 crores out of that in these shares, which resulted in the promoters shareholding going up from 65.3% to about 70.58%.

The balance, INR 130 crores is going to be converted in the April-June quarter as well, which will push up care taxes holding by about another 1.7%. The cash on the balance sheet at the end of March was INR 640 crores, which showed a robust position as far as the availability of cash is concerned. The overall debt position. The overall debt position, our -- and here, I'll break it up in the long and short term.

Our overall debt position was about INR 454 crores, of which about INR 128 crores was long term. That included INR 72 crores under the export credit scheme, ECLGS scheme as we've known popularly, which comes at a lower interest rate. And the short term of the bank overdraft and the working capital demand loans were about INR 327 crores. All of these were reflected in the CRISIL rating. CRISIL rating, we continue to enjoy a CRISIL rating of A+ right through the year, reflecting the stability of the balance sheet and their continued -- CRISIL's continuous phase in the company's operations.

I will now hand over to Mahesh, who is taking through the company's results and talk about the prospect. Thank you.

[Mahesh Iyer, executive]

Thank you, Debasis. Good afternoon, everyone. This is Mahesh Iyer. I'm the Executive Director and CEO at Thomas Cook India Limited. Since Debasis has already walked you all through the numbers, I thought it's important to highlight some of our key achievements that led to this kind of a positive performance in the current quarter.

To begin with, I'll kind of give a quick summary on the businesses of Thomas Cook and SOTC, which is more on the travel and travel-related services and then also walk you through some of the other subsidiaries which are overseas in terms of DMS and DEI, the company that Debasis talk about and then hand over to Vikram, who will walk you through the Sterling numbers.

To begin with, SOTC and Thomas Cook, the business being -- at Thomas Cook being foreign exchange continued to do well. And as we have said in the past, too, the business at Thomas Cook for foreign exchange was very least impacted by the pandemic to that extent because we qualified under essential services as early as June of 2020, and we were able to offer services to customers, be it on the remittance side or be it encashment. And that business continues to remain profitable just after the 3 months of the proposed lockdown that happened between April and June of 2020.

Every other month from July 2020, right till March 2022, the business continued to be EBITDA positive and continues to be sold at this point in time also. From a recovery point of view, the foreign exchange business had recovery in the various lines within its business in different varying percentages, the retail business at this point in time for first quarter recovered close to about 68% from a corporate recovery point of view, we are roughly around 35%. And the airport businesses, which, again, is a barometer of how the inflow of traffic is coming is currently operating at about 26% recovery.

If I kind of give a flavor to how we are looking at this trending into Q1 of FY '23, and I'm making a forward-looking statement here, which is already qualified. We are actually seeing our trends to be even more positive as compared to what we saw in the quarter ended of March. Our retail business currently is trending closer to 70% of the pre-pandemic level, corporate volumes were actually substantially improved. We are trending at close to about 57%, and the airport has already moved up to close to 43%.

So from a recovery point of view, ending March quarter as well as looking into June, our expectation is that this recovery is going to be very, very strong point by the fact that, even the borders have opened up, international commercial flights resumed operations from 27th of March. And with the opening up of offices for corporates and they were getting back into businesses, the sentiment in terms of recovery is very, very positive.

Also important to highlight here that when I'm talking about the retail recovery, this retail recovery on the foreign exchange is led by the remittance business and a very small recovery as far as a travel-related business is concerned. As you would know, as I mentioned, 27th March is when the borders have opened up. International commercial flights have started operating. Hence, the travel bookings have just started to come in. And the holiday part of the retail foreign exchange business is still to take off. So my expectation is that as that business gets into some amount of momentum, the retail volume should very quickly catch up in terms of getting to past the pre-pandemic levels, well ahead of our targeted number of December 2022.

Moving on to the other piece of the foreign exchange portfolio, which is the borderless prepaid card, the prepaid card that we operate in the business is currently operating at about 80% of the pre-pandemic level, buoyed by the fact that both the retail as well as corporate segments have kind of flowing in terms of volumes and transactions. Most of it has been the IT, ITS segment where large contracts have been won and in a form to -- were employees are attracting, corporates find it very easy to kind of place them on onshore contracts, but they are locked in for a longer period in time. And that's kind of helping our volumes to come. Also, the sweet spot of this business is the float that we generate. And for the quarter in question, we generated about $10 million of float on our borderless prepaid card that adds to our cash balance also.

Coming over to the holidays business. Here, I think that's a bit of a mixed bag in terms of Q1 or Q4 of FY '22 and my projection for Q1 FY '23. As far as Q4 of FY '22 is concerned, the domestic business is trending very close to the 2019 numbers, and there have been months when they actually surpassed.

Now again, we must be mindful of the fact that we are talking about a quarter which was a completed one because we had a Omicron effect. So for about 45 days, a large part of our operations were came to a standstill. But despite that, I think the domestic business witnessed a sharp comeback. And as we speak today, we are already trending much ahead of what we did in 2019.

Now if I kind of look at it from the international holidays perspective, there are 2 parts to it, the short haul and the long haul. The short haul are among the destinations which are closer home, the Far East and the Middle East. Over there, our recovery in terms of volumes compared to 2019 is close to about 45%, whereas it's the long haul, typically the Europe, the U.S. and Australia, where there are challenges, challenges both from a connectivity point of view and also these are restrictions that we will appreciate that there are more Visa slots available. We have truncated their people and the processing time is anywhere between 6 to 8 weeks for most of these geographies.

And in some long-haul destinations like U.S., your next appointment is not before December of '22. So given those external challenges, I think the recoveries are a little slower. But for Q1, we've already witnessed close to about 20% recovery to the 2019 numbers. But our expectation for Q1 of FY '23 is that we should be trending closer to about 40%. So we are expecting a 2x kind of a growth that would come in over the next 45 days. And the power pipeline for us is looking very strong as far as the holidays business is concerned. It's also important to highlight here that there are external challenges, attachments in terms of inflated assets and also to the fact that because of the crisis in the Russia-Ukraine sector, assets have kind of remained heightened and it's likely to remain so.

This kind of cost pressure on the cost on the input cost, while this is passed on with the customers, obviously, decision-making from a customer's point of view gets a little delayed. Our expectation in the current year is the cycle is likely to be a little longer. Typically, we look at in April, June or maybe a July quarter as far as the holiday season is concerned, this year, our expectation is that the holiday season will run right into September and will quickly be followed by the Puja Holiday and Diwali which is the festivities. So we're looking at a year long holiday season this year as compared to the pre-pandemic where we would actually qualify April to July as the peak period for the holiday season.

Coming back to the next part of the business, which is corporate travel, I think, again, that's one business has a better side of outshine on a lot of counts. One, the number of active corporates that we have has actually moved up by about 50% month-on-month. So a lot of corporates have come back into offices and started to travel. And this entire format of saying digitally operating has kind of gone through the wind, people are expecting to meet customers for their sales and as far as their new business is concerned.

So clearly, that momentum has started to come in, while a lot of these volumes and transaction counts that we are seeing is on the domestic side, international has started to pick up. As I mentioned before, 27th March being the cutoff date when travel actually started in. We have started to see a good momentum coming in there and our expectation for Q1 of FY '23 is that we should be very close to the pre-pandemic level by the close of Q1 FY '23.

Also important to mention here, from a mix point of view, other than the domestic and international, which is around 89% domestic to about 11% international. The air to nonair ratio has also substantially changed for us. Now it's a sweet spot for us because that's high-yield, high-margin business, specifically bookings like hotel, car rentals and stuff like that or other ancillary services that we do for our corporate customers. Clearly, over there, we have seen some uptick there. So we moved our range from about 7% penetration to about 12%. And our expectation for the full year that we should be closer to about 15% in terms of air to nonair ratio. And that should help income improving our yields on those businesses also.

The last part of the business is the meeting consensus -- conferences and exhibition. On that side of the business, it's been a bit of a slow start. We saw some smart recovery coming in the December quarter, but obviously, the March quarter got impacted as a result of Omicron. A lot of the travel that used to happen in the December quarter was domestic and the domestic travel got impacted because of the Omicron. But clearly, the forward pipeline that we see on the business is very, very strong.

Also important, I am noteworthy to mention here is that we've got some large contracts, especially from the government side and the government business on the MICE side is looking very, very promising. At this point in time, the recovery on the business is about 30%. And for our expectation for Q1 of FY '23 is likely to be about close to 50%. So overall, if I look at a company level, our expectation for Q1 FY '23 be likely to be about 55% to 60% of the pre-pandemic level, and we see that momentum building up both in terms of our forward booking pipeline as well as our conversations with the customer. It's also important to mention here that there are supply side constraints, both in terms of input costs as well as availabiity, but those are the headwinds that we have to face.

But clearly, we are an aggregator of services. So whatever is the input costs we are passing on to the customer, and that's going to be reflected in our deals as they are today also. Moving over to a quick summary on the other entities that we have within the group. To begin with, the DMS entities, and I think Debasis spoke about it briefly in his introductory comments, Desert Adventures and Private Safari, East Africa, are the 2 entities. Both of them turned positive. In fact, Desert Adventures was positive in the December quarter also. We had some sharp volumes coming from Russia in the previous quarter continued to trickle in, in the current quarter also and had some groups coming from Latin America.

So clearly, that volumes continue to flow into their businesses. Apart from that, they also had the benefit of cost savings that we had bought in, which has flown into their P&L, and they continue to remain positive. As we would appreciate, the period between April to June happens to be a low season because summers get very hot there. So clearly, we expect some amount of slowdown to happen. But for the full year, they were positive last year, and we expect that for the current year also, they should be EBITDA positive in the current year also. Private Safari for the first time in the parent quarter turned positive and with a very small number that came in.

But again, it shows the confidence of people coming back and traveling again, and I think that should carry well through the rest of the year. The forward-looking pipeline, again, for that business is looking very strong, and our expectation is that these 2 businesses should continue to remain profitable for the rest of the year.

There are 2 other units within the DMS, which is Asian Trails, which operates largely on the Far East Asia or Southeast Asia. We are a bit slow to start with. The markets have just opened up, specifically Vietnam, Thailand have just about opened up. We have started to get in bookings. And our expectation is that over the next 2 quarters, we should be starting to see some volumes adding up into their bookings.

Last but not the least, our business out of U.S. Elite Group. Again, has started to see some strong bookings slowing in the FIT business specifically. The mix of the business has actually changed, but they were focused on GIT. Now they are more FIT focused. We've seen some large volumes flowing through. And our current forward bookings on that business is trending very close to 2019.

So our expectation for the full year is that they should turn profitable or at least be at a breakeven level, and we expect some good outcome to come -- the DEI, photography and imaging business, that's the other business that we operate, which is slightly different from the travel business that we operate in, continue to remain profitable second quarter in a row. On the December quarter, they were profitable. And in the March quarter also, they have EBITDA positive. This is largely because of the recovery in some of the markets that have happened specifically Dubai, which has kind of led the pack. We are about close to 90%, 95% of the pre-pandemic level as far as the entire Middle East market is concerned. When you look at markets like Singapore, Hong Kong, which are other brands, Malaysia, which are other markets that have just not opened up, they are already trending at about close to 50%, 55% of the pre-pandemic level.

Again, we have taken some measures in terms of cost optimization, which is beginning to play in. And our expectation for the full year is that they should continue to remain profitable, and we should be able to deliver cash on the table for us. Last but not the least, before I hand over to Vikram, I'd like to spend a minute on some of the technology initiatives that we have taken at the last 18-odd months, we spent a lot of time in terms of technology transformation, where the focus has been to improve the touch points or reduce the number of touch points that the customer has in dealing with the company, at the same time, improve their overall experience that it gets dealing with us, whether it is the foreign exchange business, whether it's the holiday business or whether it is a B2B business of MICE or corporate travel.

Also, we've taken a lot of -- put in a lot of technology in terms of robotic process automation and AI to improve our convergence and also automate a lot of processes so that when the market opens up to the full extent, the savings that we have baked in during the pandemic continues to flow into our P&L. I'd like to reiterate here that we've made a statement. We will make it about 40% of our cost savings that have been baked in, will continue to hold on for the rest of the year also.

On that note, I'd like to hand over to Vikram for his opening comments and take it on them. Over to you, Vikram.

[Vikram Lalvani]

Yes. Good afternoon. My name is Vikram Lalvani, and I represent Sterling Holiday Resorts as Managing Director and CEO. I'm joined by Mr. Krishna Kumar, he's our Chief Financial Officer at Sterling Holiday Resorts.

Ladies and gentlemen, it's a privilege to interact with all of you. We are delighted to announce that Sterling has been profitable for the financial year '20 and '22 despite nearly 5 months of business during the financial year due to the pandemic. In effect, we had 12 months of cost and only 7 months of revenue. And despite that, we are happy to announce that we have been profitable for the entire financial year. We have had 5 straight quarters of positive CBD, and we reflect and reaffirm the strategy that we had adopted post-pandemic.

In this approach, we have scaled up our nonmember business at our resort, as impacting on revenue, we increased in terms of average rate at our resort and food and beverage spend at our resorts as well. We focus on cash generation to our membership business. For the year, our resort opportunities increased by 9 percentage points. Average rates increased by 19%. We increased our food and beverage spend by 20%. We improved our average unit rate at 8% on membership sales and a shift towards available model of membership business at our resort, thus driving an operational EBITDA growth of 48% and an operating free cash flow of 25% for the year.

In Q1 FY '23, despite the pandemic that affected us in Jan and part of Feb, our operational EBITDA has been positive driven by a higher average rate and spend at our resort. During the year, we launched 3 new destinations: Alleppey, Gir in Gujarat and Tiruvannamalai in Tamil Nadu. With this, our portfolio has grown to statistic results as on close of 31st March 2022.

The total number of points that now we have in our portfolio is 2x clearly.

[Operator]

Sorry to interrupt, this is the operator. I would request you to check your audio line. It's not clear there's some kind of a static problem.

[Vikram Lalvani]

Am I audible now? Is it better?

[Operator]

Yes, you're audible, but there's a kind of a static problem in there. So kindly check the line?

[Vikram Lalvani]

All right. So if we check the line, I'll carry on. So we have a total of 2,300 keys in our portfolio. We continue to build a pipeline of resorts in all new destinations and shall light up incrementally -- lighten up incrementally to increase our portfolio of resorts in popular leisure destinations in India. Our expansion strategy was initiated with pre-COVID, and that has continued even going forward.

In which our focus of expansion is on an asset-light method to increase our portfolio of resorts. From a customer perspective, 97% of our resorts are ranked 4 and above on 5 in Tripadvisor, with 60% of our resorts ranked in top 5 in the respective destinations as on close of March 2022. During the year, we have taken several initiatives at Sterling to introduce new customer products. We adopted digital practices to transform our business methods and enhance our distribution capabilities without adding incrementally fixed costs, in order to increase our revenue, and this is spending, as we go along. My team and I at Sterling are extremely upbeat and buoyant in our outlook for Q1 FY '23 within the pipeline of business that we have in our books for Q1 as well as for the remaining part of the financial year.

[Operator]

This is the operator, you're able to hear us?

[Vikram Lalvani]

Yes. I am able to hear.

[Operator]

Yes, you can continue. The line is clear now.

[Vikram Lalvani]

Yes, we are done. We are finished upon the Sterling side.

[Operator]

Okay. Thank you.

[Unknown Executive]

Hemanth, you can open the line for questions, please?

[Operator]

No. Yes, sir the final speak for Mahesh. Okay, fine, right.

[Unknown Executive]

You can go ahead with the questions.

[Debasis Nandy, executive]

So you can go ahead with the questions.

[Operator]

[Operator Instructions] The first question comes from the line of Ankit Kanodia with Smart Sync Services.

[Ankit Kanodia, analyst]

Good to see you back after 2 years in the con call. So first of all, the question is regarding if you can give us a brief understanding about Sterling Resort in terms of when we acquired the company, what was our thought process, how things have gone in the past few years? And how do we look at Sterling strategically in the next 2 years? If you can give some color as to what worked, what didn't work? And how do we plan to prepare ourselves ahead, that would be great.

[Vikram Lalvani]

Can you hear me?

[Ankit Kanodia, analyst]

Yes.

[Vikram Lalvani]

Okay. Moving on to our acquisition, and we are actually expanding our portfolio of resorts. We went into a lead to more of operations in terms of acquiring with us. And some of the resorts during that period also went into -- gave us a good market share and also there a good profits in some of the resorts. But somewhere at that -- some of these are not making enough money. But then we started to streamline our operations during the year '19, '20, that's when the pandemic started in the year, March of 2020, and pandemic really affected our operations in the year -- financial year '20, '21 and in the year '21, '22.

While 2021 will be -- the effect was much more sharper and deeper, '21, '22, we were able to manage the society more better. What happened during pandemic was that we were able to actually look at our operations with slightly more microscopic view of the cost and other infrastructure. We are able to cut down our costs substantially. The costs came down on the road transport and some of the other areas of administrative and other IT related expenses.

Now with cost being brought down substantially in the last 2 years. And after the pandemic, it was April, May of 2021 when business started coming back, we also noticed that the pattern of travel has completely changed. People have started traveling because we missed 2 summers, April, May, June is a substantial quarter for us, that's when most of the business happens in this industry.

But unfortunately, the last 2 years, last 2 financial years, the first quarter April, May, June has been completely a washout. But as I said that June may have larger and the resorts started opening up and business value coming in. We go to the travel patterns as change and people have started traveling all over the year actually.

And therefore, that is a starting point and from 2 last years, this is -- we actually see the business have started to go up. So again, Omicron came in the month of Jan, Feb. So we saw a dull or a dullness in these two months and then from March it picked up. So what has happened in the last 2 to 3 years? Yes, we gave up some of the loss-making locations. We went into more profitable locations. We also expanded our portfolio by going to a managed contract kind of resorts where our exposure in terms of CapEx and OpEx is not much less.

And therefore, we are able to -- with all these combinations, we are able get us a very profitable year -- for this financial year FY '21, '22. Also the membership that, what we've done is we have -- that's an exposure out of all the branches in the country. We have gone into cuisine to more profitable location. And that where the profit comes from. We actually -- if you sell more from the resort on site sales, we call it, I think you make more money.

So in the membership business also, we have scaled down our operations across all the branches. We are moving to more profitable locations. So we're able to attach customers with new products and services. We are directly at the resort location itself and thereby improve the membership EBITDA also in the financial year.

Having said that, both the membership business and the resort business profitability is going up and with cash coming in, we are able to maintain healthy cash balances and the debt levels at the bank also have come down. So that's the status as of March month to future. April, May of the current year, the first quarter looks very, very promising. I think of the note is that most of the weekends our occupancies are gone up to almost 98% to 99%. And we are expecting this quarter to be one of the greatest quarter in the last 4 years. That's the update I was giving.

I also check-in here where our strategy has been very clear in terms of ramping up our revenue. So we actually also build nonmember vertical rates for all our resorts, wherein we track our business segment such as FIT, conferences, wedding, just like a typical for any other hotel or resort.

And today, that's a component of the overall occupancy is about 65%. So we've been able to ramp up the nonmember business at our resorts. We've been able to drive efficiencies, better efficiency in our membership business. We will continue the hybrid model of nonmembers and members, and we will optimize that depending on the time of the year. Also a big shift that we had and that's upon impact, which was in the pre-COVID level was to expand in an asset-light model.

And since then, we actually -- we have over 12 resorts where we actually expanded our India asset light model and even asset-light model, we have no CapEx. We are using our distributing spend. We need our sales and marketing verticals as well as our operations verticals across our resorts, we run the resorts for the owners and the managers and we get monetized on the basis of that.

So these are completely 0 CapEx model of our expansion. And we embarked upon that pre-COVID and during COVID we continue to expand using that model. Even as we speak today, the pipeline is still firm for new destinations and new resorts for us to expand in that. So that's how we are structured and that's how we have updated profitability. And now we are looking at scaling it up to the next year.

[Ankit Kanodia, analyst]

Thank you so much for the detailed answer, that really helped, sir. And my next question would be related to Digiphoto Entertainment Imaging. So this is one of the business which we have acquired recently. And if I'm not wrong, provide me, this is the fastest-growing business in terms of revenues. So if you can throw some color as to what is the business model who are our clients and how do we see it going forward? That would really help us understand it much better.

[Mahesh Iyer, executive]

Ankit, this is Mahesh. I'll take that question. So as you rightly said, yes, it's a new kit of the block. We acquired this in somewhere in 2019, 2018 and 2019 beginning. That's how the business came into our hold. Just to give you a color to the kind of model we operate there into the, what I call the imaging solutioning services company. It's kind of adjacent to a travel service company because most of the sites that they operate in are other sites where a traveler would typically that is in a country or a destination where he is traveling to attraction as we call it, in travel parlance.

Now effectively, what they do in those businesses, they have got cameras, camera lens or automated cameras, which captures photography and different times when you are celebrating or having a good experience, and that's being sold for a value to the consumer. From a market penetration point of view, they have about close to 250 plus sites in which they operate. They have operations spread across some 11 countries. And their annual run rate in terms of revenue is top of about $85 million.

So that's the kind of volume that we are talking about. Clearly, from a business model point of view, it's more tech-driven, it's a technology services, where we believe a lot of opportunity to kind of co-exist and co-sell with travel and travel-related products exists. So while that's not a core focus that we are focusing on, on a stand-alone basis, the business is very profitable with very little in terms of co-opting or co-selling with other companies are concerned.

But on their own, they have a very strong footprint across the globe. I must also mention here, we are the second largest imaging company in the world and also some of the new contracts that they have gotten specifically in China, which is their first market that they've got in post-pandemic, that seems to be opening very well because these are some of the large sites we're talking about, which is Universal Beijing and Disney Hong Kong. So -- sorry, Disney Shanghai.

So clearly, we see a great potential. The business model is well entrenched. It's led by technology. There is some amount of people intensive in as well. But I think the pandemic has kind of given us the opportunity to bend of rightsize, infuse a lot of technology, upgrade some of the technologies, which kind of allows us to kind of go in and bid for new contracts and make that business profitable going forward. I must also mention, the business doesn't require cash. It's not a capital intensive business because the capital cycle on that or the working capital cycle is less than 30 days. So it's kind of transport itself.

[Ankit Kanodia, analyst]

That really helps. My last question would be related to the cash position we have in the books right now and how -- I mean during the start of the pandemic, in Feb, 2022 -- '20, 2020, we earlier wanted to do a buyback when there was a big fall in the market. But later on, we changed our stance and we went -- we stopped that and rightly so because there were requirements of funds at that point of time, and there was a lot of uncertainty. And now when that uncertainty is no more there and assuming that the COVID is faster, if the market again gives that kind of an opportunity say, if our stock price goes down, would we be willing to do that buyback again because of the cash we have on the books? Or do we have any other plans?

[Madhavan Menon, executive]

Yes, Ankit. Good afternoon, Madhavan Menon, here. Look, as we went into the buyback, obviously, where you clearly articulated the rationale behind why we went into it. Obviously, things changed, and we worked with SEBI to get this buyback canceled. The reality is, as on today, given what we've faced over the last 3 years, I think our first priority is to bring the business back to normal functioning, normally get all our businesses firing on full cylinders rather than looking at a buyback at this point of time.

Having said that, no opportunities that are off the table, Ankit. At some future date, if we do see an opportunity, and we believe that we can get there -- we will -- yes, we will consider it, but it's definitely not on the table today.

[Operator]

The next question comes from the line of Nidhi Babaria with Dalal & Broacha.

[Nidhi Babaria, analyst]

Sir, just a couple of questions on ForEx side. Just your portfolio for ForEx losses has increased significantly on a Y-o-Y basis, like last year we were making profits, now we are making losses. What would be -- what type of year do you see like FY '23 and '24? And my second question would be what -- like the competition from revolt and other players are coming intensely, what would be your take on these new age companies? And how are you going to compete these companies?

[Mahesh Iyer, executive]

Maybe I'll take both those questions, Mahesh, here. Point number one, with regards to profitability in 2021 versus loss in 2022, I think we are not comparable. And we appreciate that the quarter -- the year that we are talking about FY '22 also had a profitable quarter, which is the Jan-March quarter, so that was a full operating month because pandemic hit us somewhere in the last week of March 2021 -- 2020. So to that extent, there is a profitability element that has to send us.

As compared to what we have seen in the current quarter, we had a large or a long runway in terms of losses, which was the pandemic period. Also to mention that from a recovery point of view, as you can see in the current quarter, which is the last quarter of FY '22, you could have -- you would actually witness that into other foreign exchange. The segmental numbers are actually talking about the improvement in performance from about INR 27 crores that we had in Q4 FY '21 to Q4 FY 2022, there is an -- we have moved to about INR 38 crores. So clearly, from a recovery point of view, the business is back.

And as I mentioned in my comments in the opening remarks also, the business continued to remain profitable. A little bit, we are still doing a catch up game because we are not at the pre-pandemic levels. The borders have just been opened. And the travel-related foreign exchange side of the retail business is still to come back to normalcy. What we are witnessing today in the foreign exchange business is large part of remittances, which are student and other related remittances that we're doing, and they are already trending at higher than the pre-pandemic levels, but a large part of our portfolio, close to about 50% of our portfolio also on the travel side of foreign exchange, which is still at a very nascent stage in terms of recovery and is directly inked to the international holiday travel that will take place.

So the season has just begun, and our expectation is that somewhere before the end of this year, we should be close to about full recovery to the pre-pandemic levels. Coming to your second part of the question, in terms of competition from the players that you mentioned. Well, look, the space that we're paying is very different from what the competition base. We are not a technology or a digital company only. We are a brick-and-mortar, which also offers technology, seamlessness and ease and convenience to do a transaction. I think our key factor on the USP that I would call about. These are ability to seamlessly execute the transaction across all channels without creating a friction for the customer.

Now at the end of the day, the price is very transparent as in the past price wasn't so transparent, but today, everyone knows the price of the dollar in the marketplace. So the price is no more a game that anyone plays. It's more about how the experience is. And I think given our past and our experience of this business kind of puts us in good step to kind of take any competition that comes in place.

I'd also like to mention here, as I spoke about the digital transformation that we did across our businesses, in the foreign exchange business also, we have digitized the last -- lot of our processes. And one process, which is very specific to the digital change that's happening in this is the KYC process. You will appreciate that this is a regulated business and a lot of documentation which to be collected and stored on record. We've kind of automated that entire process at the back end here, and the customer can transact through a video mode with us without having to step out of his office or home, and we will deliver the foreign exchange at his door step all in under 2 hours. So clearly, we've kind of taken the process back where it matters to the consumer and reduce the amount of handshake that we do in a transaction. And that, we believe, will kind of define the success in futures to come.

[Operator]

[Operator Instructions] Now the next question comes from the line of Senthil Manikandan with ithought Financials.

[Senthil Manikandan, analyst]

My first question is on the DMS side. So if you could -- given overview of the performance during the year and also how do you see going forward?

[Debasis Nandy, executive]

Okay. This is Debasis here, and I'll take that question. So Mahesh has covered that in the course of his overview, but let me get into a little more specifics on the DMS side. So the DMS, some of the DMS units have returned to profitability fairly early. And it dependent really on what was the restrictions regarding Visa and the access to tourists. So for example, if you look at -- we have 5 units across Asia Pacific, Africa and the U.S.

So if I look at the Asian units, in Middle East, we have a unit called Desert Adventures based out of Dubai, and they operate out south of Oman and Jordan. So they return to profitability fairly early in the October, December quarter. In fact, as we mentioned in the second quarter in which they are continue to be profitable. And it is also the only unit in the Thomas Cook Group, which was profitable for the full year -- full calendar year '21.

So as you know, tourists have been coming into Dubai, in a fairly unrestricted manner during the last 7, 8 months, and they are taking advantage of that. The inflows of tourists is largely from Eastern Europe -- Russia, Eastern Europe as well as the Western part of Europe and they get some of customers from South Africa and U.S. as well. So that is continuing and they will -- and some of the prolifics also happened because of the export that happened that was there between October and March.

In terms of prospects, I think you'll see a lower inflow in the next even because that's the peak of the Dubai summer. But post that, we can see a fairly large amount of order booking. So we are very sure that we'll continue to do well, and we'll continue to remain profitable.

The next unit in line in DMS that let's talk about is the one in Africa, East Africa that unit based in Kenya, it does business in Kenya as well as Tanzania. Now they have -- the peak season for them is actually start from end of June, the migration season and it goes on till about August, early September.

But even in the offpeak season of Jan, March, they turned around very smartly. In fact, they did something very innovative. They introduce charter safaris. So in the world of safaris, typically, these are -- we see small groups coming in. But they were the first in Kenya to introduce chartered flights for safaris and they've gotten passengers from Eastern Europe like countries like Romania, et cetera. And that led to a fairly large inflow of customers. Their order bookings are very comparable to the numbers they had in 2019.

And we are quite sure that they are -- for the full year, they will show some higher sales -- very close to 100% recovery as compared to '19, '20. The third unit is in South Africa, which is a smaller unit. It is -- South Africa went to several rounds of the COVID-19, including the Omicron, as you know. And -- but they have recovered from that. And now the order bookings have started picking up. And we are, again, quite sure that, like Kenya, they will also see a sharp turnaround in the coming quarters. In USA, the elastic unit that we have is doing very well in terms of order booking. The summer season starts in June in U.S.

But if you look at all we can talk about is order bookings. In terms of order bookings, there are about 95% of the level they have achieved in 2019 at the same time. And we are very sure that as time progresses, they will catch up and they will probably go to closer to 100% recovery.

The last but not least of the unit is Asian Trails, which operates in Southeast Asia. Now this is one unit which has been affected the most because as you know, the restrictions on Visa and tourist taxes were lifted very late. In fact, it's only recently that has been resetting Vietnam and Thailand, which are major markets for them.

So they have started receiving order bookings and their season is actually quite in time because it principals will start from about July. That's the time when Europeans go on holidays and we cater primary to the European tourists. So we are looking forward to a decent summer, and we'll see the -- we'll see a decent recovery in the July-September quarter.

[Senthil Manikandan, analyst]

Second question is on the cash flow generation. So as you mentioned that pre-COVID process now you're operating at a 40% cost reduction level. So over the next 2 to 3 years at the consolidated level, what would be the sustainable cash flow generation?

[Debasis Nandy, executive]

So in a pre-COVID we are generating, as a group, we are generating about INR 200 crores of cash a year. Obviously, with the onset of COVID,all that got wiped out. But that cash flow that we generated actually helped us to stay afloat and revise during these 2 years.

Going forward, I'm sure, like Mahesh mentioned, we will get back to normal capacity and grow beyond that in FY '24 and beyond. And we'll act to was -- ways of generating cash like the way we did. So we can -- right now, we are obviously not generating cash. We are just about -- we are at a breakeven level as far as slightly better than a breakeven level as far as EBITDA is concerned. But we will start generating cash fairly soon as soon as our business goes beyond a critical month.

I think the one important point here, Senthil, is that we have managed to bring down our breakeven point very, very substantially because of the massive cost reduction that we have undertaken. At a consolidated level, our costs are about at a standable level cost -- at the India level, the costs are down to about 50%. At the overall level, the costs are down by about 45%.

And I'm talking about operating costs. And this is as compared to the pre-pandemic levels. We expect that we'll be able to hold on to most of these cost savings. And that is what we're bringing down our breakeven point, which is why even with the sales, which is far lower than what it was in the pre-pandemic times, we have been able to reach the position that we have done.

[Operator]

And the next question comes from the line of Mithun Aswath with Kivah Advisors.

[Mithun Aswath, analyst]

Just wanted to understand more on the profitability side, how do we gauge in terms of what sort of sustainable margins would we do in each of the segmented businesses if we reach pre-pandemic levels of revenues because there are some businesses which have reached that level but your travel business still continues to be quite lower, much lower than pre-pandemic level. I just wanted thoughts on that.

Now if I go back to FY '19 full year profits, the margins on an overall basis are not great, even in FY '19 or FY '20. But with these cost reductions, if we were to reach those levels maybe in '23 or '24, maybe more like 24%. What sort of margins at an overall level could the company potentially enjoy, because I think in the last quarter, we were at operating breakeven on a consolidated level. I just wondered your thoughts on that because as you grow with expenses also come back to some extent is what I wanted to understand.

[Debasis Nandy, executive]

Okay. Debasis here, Mithun, and I'll -- let me try and take that question. So Mithun, there are 2 parts to this, okay. One part is obviously the gross margin and one is the EBITDA, the net margin. In terms of gross margin, I think we haven't lost ground, okay. We have continued to operate on the same or even better gross margin than what we did previously. Foreign exchange is a casing point, domestic is a casing point. Foreign exchange, we used to run at between 1.2% to 1.3% gross margin. We are running at around close to over 1.4% right now. And that 10 bps is a lot as far as ForEx is concerned, given the nature of the business.

Domestic business is running at -- domestic where we are actually, as of now, we have crossed the pre-COVID levels. We have moved up the margin from 15% to 17%. So that's just some examples of the margin improvement. And even in the areas where we haven't reached the pre-COVID levels even then we have been -- we have held on to the margin. That's something very dear to us. And we need to -- we know that in order to get back to profitability, we need to hold on to those gross margin levels -- but there's a layer of fixed cost below that, obviously, which takes us to the EBIT level.

Now in terms of the fixed cost, this is where we have achieved a sharp cost reduction. If you look at industry, let me quote some numbers compared to FY '20 -- FY '22, vis-a-vis FY '20. So if I take our full consolidated view, our overall staff cost for FY '20 was INR 830 crores. And this is down for the full year, which is down to INR 498 crores. And influentially, for FY '22, in FY '22 starting 1st of April, we had restored all salaries. So this is not with any salary cuts, et cetera. So at full salaries, we are down by about -- our costs are down about 40%.

In respect of establishments and utility costs, et cetera, our costs went down from INR 548 crores in FY '20 to about INR 257 crores in the current year or in the year that just went by, which is a reduction of 53%. Overall, our costs went down from INR 1,378 crores to INR 755 crores. That's a reduction of INR 623 crores, which is about 45%. Now you are quite right, some of these costs will come back. For example, we will get incremental marketing cost, marketing and promotional costs. However, those tend to be potentially variable because we can regulate that spend based on the sales that we are getting. So it's not really bothered. If you get more sales, we spend more on marketing and therefore, there's no negative impact on the bottom line.

As far as other costs are concerned, the staff costs are there to stay because our headcount is frozen as of now. We are not encouraging any new hiring. In fact, we are operating at a lower than a budgeted headcount. And in the 2 years -- in the past 2 years, we have actually focused a lot on technology in order to make sure that we don't need to increase headcount when the business comes back. Mahesh covered this extensively during his speech. And that will help us to keep the staff cost down. And interest staff costs are down and most of the other costs are connected to headcount. And so those as we have seen, those costs will also be kept down. Does that answer your question?

[Mithun Aswath, analyst]

Yes. I just wanted to get a sense, see, obviously, we've not really had even one normal quarter in the last maybe 6 or 7 quarters. Maybe the December quarter was reasonably okay. I'm just trying to sense from the -- your own forward bookings and all that. Where are we in terms of how close we are in the travel business to pre-pandemic levels? Or how long do we have to go to reach those revenues that you used to do? I just want to get a sense on that because then the profitability at an overall level, would change quite materially and you'll get a better picture of what is your run rate, which could be sustainable. So just wanted your thoughts on that.

[Mahesh Iyer, executive]

Mithun, I will take that question. This is Mahesh here and this is also available on our investors presentation that we uploaded. If you look at the business by the recovery percentages that we've spoken about this, if you look at the last quarter that went by, different businesses have different spaces of recovery. On an average, and at the company level, we are close to about 45% to 50% in Q4 FY 2022. But if you look at the optimism in terms of what we are projecting based on the bookings that we have on hand and the conversations that we are having with customers, clearly, it's moving up by at least a 50 percentage or 50% as compared to Q4 of FY '22, just in 1 quarter.

So the momentum and the pace at which the recovery is happening is very, very fast, and there are multiple reasons for it. One is for the first time after March 27 that we've actually seen commercial flights actually taking off. And there are still supply side constraints. The full schedules have not been filed. The airlines are not operating to full capacity and there are capacity constraints. So is the case with hotels and hospitality if you look at them, they're also not operating at full capacity. A lot of them have gone out of business. So in the case with restaurants, a lot of them who went out of business.

Now as the COVID veins out and people are getting back into business, the capacity is getting high up. So clearly, from our point of view, as we see, we are seeing the recovery happening very quickly, and our expectations on different businesses getting back to the pre-pandemic level are at different stages.

As I mentioned initially, the foreign exchange business, we expect that to come to near 2019 levels before the end of this calendar year. I'm not even talking in the financial year FY '23. I'm saying calendar CY 2022. If I look at the corporate travel business, our expectation is somewhere by Q2 of FY '23. That is Q3 of CY '22. We should be closer to the near pandemic levels. The 2 other businesses, which is the B2B side of the holidays and the B2C side of the holidays and more importantly, focused on the international side, if where the recovery let is going to be a little more longer. And the reasons for that is, one, borders are still opening up. You would have read the news around New Zealand only opening up from 31st of July. Thailand has just opened up. Vietnam has opened up. U.S., while it's opened up the Visa-related challenges.

So there are multiple, I would say, blocks that we need to still fix into this entire puzzle before the market recovers to normalcy. Our expectation on the holiday side, we should be seeing a full recovery to 2019 levels, somewhere around the third or -- second or third quarter of FY '24, not before that. So that's our kind of estimation in terms of the holiday business. But I think the other businesses which will turn out the volumes and the yields as Debasis rightly said, we are holding on to the yields and in many cases, include our yields. And with the cost saving measures that we have put in place, the texture and the flavor of our profitability should start looking much better.

[Vikram Lalvani]

Vikram here. Can I also step-in for resorts?

[Mahesh Iyer, executive]

Please, Vikram.

[Vikram Lalvani]

Yes, okay. So as far as the hospitality and resort business is concerned, we -- what the outlook, what we're seeing in Q1 from what we've seen in April and May so far, as far exceeded what we have done in April and May of 2019. Because for 2 years we were shut during this period due to COVID.

And in the resort business, our months of April, May, June is actually the strongest months in the entire financial year. Given that it's a summer season and people will travel during summer and it is holiday time. In terms of even sustainability, even if we have to compare with what was there in 2019 and what we have today. We have ramped up our distribution channels without adding any future costs. So that's how our turnover in revenues are growing without an incremental growth in fixed costs, number one.

Number two, we had several of a high-cost low profit lease with us in 2019 period KPA, that will also replace it more profitable, better destinations, asset light results. So to that extent, even as the business scales up in Q1 and going forward, it need not add on the same kind of costs that added on in the comparable period of 2019. And why am I looking at 2019 is because of the fact that, that was a pre-COVID level and that was the time when we had our entire inventories operational. So that's what I want to emphasize on the resorts side.

[Mithun Aswath, analyst]

Got it. Just one last question on your cash balance, which you've shown in your presentation of almost INR 600 crores, how much would that be of free cash balances in terms of you have some advances and other numbers also in that? Just wanted to understand because your interest cost on a quarterly basis is close to INR 17 crores. And the last one is also on your depreciation. Why is it so high? Where is that emanating from? So just a couple of questions.

[Debasis Nandy, executive]

Okay. On the cash balance, if we talk about the cash balance first. See we cannot -- we have to look at the cash balance along with other items of current asset and current liabilities. Just like there are -- as you mentioned, we have got advanced on customers. We have also given advance to vendors. It's not that we have held on to the money, okay? So they tend to get largely offset. Just like our debtors, we have our debtors and creditors.

And as of now, as of 31st March, our debtors are actually higher than greater. So cash balance is more like, if you take all these 5 elements of working capital cash basis actually becomes sort of a balancing figure. So it's not that we have to pay vendors out of this cash balance. We will receive money, continue to receive money from our debtors and from our customer advances, and we'll funnel this in the form of creditor payments as well as advances to vendors. That's on the cash balance side. Sorry, what was the second question?

[Mithun Aswath, analyst]

On the interest cost, you have close to about INR 16 crores, INR 17 crores a quarter. And your depreciation is quite high. Just wanted to understand where are these 2 elements coming from?

[Debasis Nandy, executive]

Okay. So as you know, we have about INR 454 crores of loans on the books. Our loan balance remains more or less steady during the year. So if we take the opening balance as of 31st March '21, it was about INR 450 crores end of the year is INR 454 crores. So it's more or less steady right through the year. There is the interest on those funds. Most of it is in the form of short-term fund, which is working capital demand loans and bank orders up. Some of that is in the form of about INR 72 crores of that in the form of ECLGS loans, which are longer-term loans, which are given through our special government scheme through the banks, of course.

So overall, you will not see too much of changes in the -- at overall level, there's not much of change in the interest costs fairly flat. As far as depreciation is concerned, while the travel services tend to have an asset-light model, we also have Sterling, that's one, which is more asset heavy driven properties. The other thing that's there in the depreciation, of course, we have the regions or various properties, which is offices in case of Thomas Cook, Thomas Cook Travel, Thomas Cook as well as the resort, some of the resorts that Sterling has are on lease rental. So as per the accounting classification, some of the lease rentals get classified into depreciation, some amount to get classified into interest. So that's -- it's coming out of that.

[Operator]

The next question comes from the line of Pooja with PCG Advisory Services Private Limited.

[Pooja Boee, analyst]

I have a couple of questions with respect to Sterling Resort. So now you have a breakup of how much percentage of customers would be a time share and how much would be working. So question is revenue that comes from time share? And also, I have observed that in Sterling Resort, the EBIT margin has declined from 38.4% to 27% and now 25.9%. So what are we planning to achieve this 25.9% steady going ahead?

[Mahesh Iyer, executive]

Okay. Two things. While we have around -- as Vikram mentioned earlier, we are around 36 resorts with 2,300 rooms. So the share of rooms, which is the members and guests. The ratio is going up towards guests side. So it's roughly around 55%, 45% at nonmembers, yes. Member and nonmembers. Members typically occupy around 45% of the rooms we have or the occupancies we have and 55% of the occupancy from the guest side. And guests, we get the room revenue as well as the SMB revenue as incurred at the resort.

For the membership, we get the annuity revenues and the amortized revenue from the customers were paid as a full product value. On the overall reported revenue for the year concerned, if you ask me what is a membership amount at revenue coming to the P&L, it is typically 1/3 of the overall revenue, which comes as far as the reported number is concerned. That's why the revenue number stands. As far as profitability is concerned, while you see a decrease over the last quarter of previous year because last quarter previous year, we had some content reversal, which is giving an upside on the revenue as well as on the EBITDA side. That's we have faced.

[Pooja Boee, analyst]

So are we planning to keep these margins steady like there will be no down side going ahead?

[Mahesh Iyer, executive]

Come again, sorry?

[Pooja Boee, analyst]

So are we expecting to keep these margins steady for Sterling? Or if there could be some more margin decline going ahead?

[Vikram Lalvani]

No, in fact, in margins from here, this is Vikram here, only bound to go up. The reason being, if we see that the nonmember side of the business is actually growing at a faster pace. And typically, it is moving from what it is currently at about 24%, 25% or towards at least 30% plus it's actually moving where. And it is highly sustainable and impact there is opportunity, which is growing because of the fact that we are growing the nonmember vertical far more significantly as it was before. In 2019, for example, the balance of that mix was just the opposite. And now actually, we see the ramp-up of the nonmember business. And as I mentioned, we use distribution it's a low-cost distribution method to ramp up our nonmember business. That is what will lead us incremental EBITDA going forward, which will then be on a sustained basis as we keep stabilizing.

[Operator]

The next question comes from the line of Sandeep Varghese, an Individual Investor.

[Unknown Attendee]

Can you hear me?

[Debasis Nandy, executive]

Yes, we can hear you.

[Unknown Attendee]

Okay. So I think this is more a strategic question in general. I know that the group is entirely focused towards recovering all parts of the business, and that's clearly evident by what we see happening. This is when I say strategic question, I mean with regards to when you compare Thomas Cook and its subsidiaries, their business models versus one that is predominantly online and you have online players doing the same thing or similar things, right.

Given the major shift of a lot of businesses towards online offerings that accelerated by the pandemic also, right? Moving forward, how do you see your Thomas Cook and its businesses playing out? Is there going to be a shift towards mostly digital? Or do you feel that there is inherently a significant offering still by having a partly offline and partly online model?

[Debasis Nandy, executive]

So Sandeep, I'll take that question, and I'll get my colleague, Vishal to join and if we have any more funds to add. So Sandeep, to begin with, I think we've always stated this, and we'll continue to state this, whether it was pandemic or pre-pandemic, we were always an omni operator in this space. We had digital mediums to reach out to the customer to either market the products or to afford them to actually book the product, and that continues to be so.

While we also had off-line stores and also our third-party distribution network, which was managed and controlled by us, which were also distribution points for the customers to buy our services. So that model continues to exist today and will exist in times to come. And I think that's also a reaffirmation of how many of the digital models, specifically in the startup space who came about and then expanded. I mean, some case in point will be some of the startups like Lenskart, Nykaa, Sugar and everyone else started online, but we are very quickly realized that there is an offline store that also requires them to keep the kind of brand visibility and depend on customer penetration that need to.

But I think in our case, we started the reverse model, we were a brick-and-mortar, and we kind of moved online. So that mix of online/offline will continue to operate across all our lines of business. What has accelerated, and I think you kind of touched on that point during this period is how you kind of make that journey even though seamless. Look, if it's a bit of a product that somebody needs to buy and it's a INR 500,000 product, it's much easier to make that decision online and move on.

But when you are talking about holiday services that can into a few lakh rupees, obviously, the customer requires a bit of a high touch. And also there are corporate cities,right? Applying for a Visa, and the kind of question that one needs to go around with it's not an easy task. So somebody needs to sit across the table, get things sorted out, collect a lot of paper work around it, to ensure that he gets it right the first time because there is no opportunity for us to go back and submit and resubmit the Visas, post the cancellation or a denial. So clearly, I think from a business point of view, we believe that the online/offline mix will continue.

We'll continue to keep investing in giving the power in the hands of the consumer to choose how he wants to talk to us. Today, we are at the call center. We as a distribution point in the form of a physical store. We have an online store and probably any other model that we will think will evolve for a period of time. It's something that will be so open to the customer to interact with us.

On that note, I'd like to hand over to Vishal, will be a slide thing more.

[Vishal Suri, executive]

I think Sandeep, your question was more about the strategic intent. I think the intent continues to be an omni-channel player, and we will continue to engage with the customers through multimodal distribution points, be it digital or physical for that matter. And I think that is where we are. We continue to track what percentage of our business comes from each of these channels, and we ensure that all these channels are courant with each other and customer gets a seamless experience whenever he engages with us. I think that's where we are at this point in time. Mahesh has pretty much covered where we stand from a strategic intent perspective, and I think this model has been tested, and we believe in this model at this point in time.

[Unknown Attendee]

Sure. My final question is with regards to as an investor, how do I realize Thomas Cook prioritizing the various segments that we operate in today. So given that each segment experiences at different margin of sorts, at your group end, do you sort of prioritize the business that you have segment wise based on their margins? Or there was this driven equal importance?

[Mahesh Iyer, executive]

So Sandeep, I think it's like trying to say choose between your kids, right. That's not the model we follow. When there is some method in the madness, which is in terms of capital allocation. And that goes more about saying which business has the propensity to deliver more cash or more profit on the table. That's what the allocation will be maximum. Obviously, the levers when we decide profitability or cash allocation will be the kind of margin color of the margin visibility we have on the business and its opportunity to grow faster than what the market will grow at.

So some of those considerations go in. But clearly, as I said, foreign exchange has been the front runner for the group and it comes to India for specifically and continues to be the cash generator. But again, the inventory being cash, it also consumes a lot of cash in that business. The other business like holidays and all have been generating profit, and we'll continue to do so in the future and then we had this bit of a hiatus in the last 24-odd months. But from a road to recovery in the future, we feel very confident about it.

[Operator]

Ladies and gentlemen, due to the time constraint, we are -- the question-and-answer session ends here. I would now like to hand over the conference to the management for closing remarks. Thank you.

[Madhavan Menon, executive]

Good afternoon, I'm Madhavan Menon, here. First of all, thank you for all the questions that have been asked today, which I thought were particularly addressed concerns on the outside. I just want to sort of end this by saying 2 things. One, the bounce back that we are witnessing, especially in 2 of our businesses, foreign exchange as well as corporate travel, both of which are very close to their pre-pandemic levels driving higher margins is one important point to take note.

The other aspect is that as the world opens, leisure will open also in terms of international travel. While we keep reading all these stories in the newspapers about Visa constraints, the reality is that Southeast Asia, as we thought is opening almost entirely without any restrictions, be it a Bali, be it a Singapore, be it a Malaysia, be it a Vietnam, be it a Cambodia. And all these locations are going to have direct connections, both from the likes of Indigo, Vistara as well as airlines from those countries. So access will not be an issue.

My expectation is that in this quarter, you will see the travel businesses clearly driving growth to the recovery stage. As far as the destination management businesses are concerned, as Debasis mentioned, we've seen a full recovery at Desert Adventures. The others will start -- Asia will start reopening. India will reopen closer towards the end of this year.

But I think what is important to recognize is that the driving forces behind our recovery is one Sterling Holiday Resorts, which has clearly shown 6 quarters. If you look at Thomas Cook and SOTC having at a fully integrated level, having actually come back to breakeven, if not profitability. And DEI, which has fully recovered from that point of view.

I just want to -- last point I want to make is that this is not just a recovery story. This is actually a transformation story. Also a transformation story because if you look at the cost of 40% that both Mahesh and Debasis alluded to. The reality is we intend to retain these savings rather than the disbursement of -- as growth comes back because we've done a fair amount of automation over the last 3 years, and these had complemented, if not replaced the people who are the costs that we have reduced.

My expectation is that all the companies in the group have transformed themselves from a cost and efficiency point of view, including Sterling Holiday Resorts, I mean that is the most clearing example of a transformation. If you look within the Thomas Cook, SOTC segment, the example of transformation is corporate travel, which in SOTC had not made money earlier but has become profitable with a 60% recovery.

So if you look at all these circumstances, we had very good reason to be optimistic of what we see. This is actually coming a little faster than we had anticipated because once the opening started, it's sort of grown open. And the demand that we're seeing despite the higher input costs is something that we wonder how it continues, but the world calls it recovery or it calls it revenge travel, whatever you call it, I think the higher input costs are actually beneficial to us because we're seeing higher margins in the form of commissions that we get through the bundling of products.

So -- and if you look at Sterling, look at their average room rates, K.K., correct me if I'm wrong, we're talking about a 26% growth in your room rates, your cash -- their cash generation has gone back to normal. So overall, I think we have good reason to be optimistic. And if we keep to the way we are right now with minimal CapEx, sustained margins and maintaining our costs, I believe that we will come through this a lot better than we were pre-COVID. Thank you.

[Operator]

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.

[Vikram Lalvani]

Thank you.