Thomas Cook (India) Ltd

NSE:THOMASCOOK

Earnings Call Transcript 2023-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Thomas Cook India Limited 4Q FY '23 Earnings Conference Call hosted by IIFL Securities Limited. [Operator Instructions] Please note that this conference is being recorded.

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

[Akul Broachwala, analyst]

Thank you, Yousuf. Ladies and gentlemen, good afternoon, and thank you for joining us on the 4Q FY '23 Earnings Conference Call of Thomas Cook India Limited. I invite the company's senior management to discuss the results and business strategy. We'll begin the call with opening remarks by Mr. Madhavan Menon, Managing Director, followed by the management team. And thereafter, we'll open the call for a Q&A session.

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

[Madhavan Menon, executive]

Thank you. Let me thank everybody for participating on this call. Let me then start off -- kick off, by introducing everybody in the room from our side. I've got Mr. Mahesh Iyer, who is the CEO of Thomas Cook India Limited; I've got Mr. Debasis Nandy, who is the Group CFO of the Thomas Cook India Group; I've got Mr. Vishal Suri, who is the CEO, MD of SOTC; Mr. Vikram Lalvani, who is the MD of Sterling Resorts, Sterling Holidays; and Mr. Ramakrishnan, who is the MD and CEO of DEI.

I'm pleased to report that we announced a good set of results yesterday where for the financial-year ended 2023 we reported a 163% increase in earnings income from operations of INR 5,111 crores against which we reported an operating EBITDA of INR 277 crores and an operating PBT of INR 63 crores. The performance was primarily driven by Thomas Cook, who reported an operating EBITDA of INR 117 crores; Sterling Holidays reporting the same number as an EBITDA number; SOTC reporting a number of INR 28.4 crores; and DEI reporting a number of INR 67.8 crores.

The primary drivers in terms of our business segments was Foreign Exchange, Corporate Travel, the Incentive business, Hospitality and the Imaging business. all these businesses reported far better profitability than they had in the previous 2 years, which obviously, as you're aware, were disrupted by the pandemic.

If I look at a cost level -- I mean from a cost and productivity level how we did this, we -- through the pandemic, we actually reduced stock costs. And in this -- for the financial year-ended March '23, you will see savings of 20% across the group. However, I just want to point out that several companies within the group are clocking at 30% plus in cost savings, and our intent is to sustain these cost savings in the medium to longer term. The -- so there's cost rationalization.

The second important point is the improved margins. And if you look at our EBITDA margin for the year-ended '23, it stands at 5.4% as compared to 3.6% for the similar period in February financial year-ended 2020. Obviously, all these numbers are showing significant growth because we had losses in the previous financial year as a result of the pandemic.

A third important driver was the productivity improvements that we've achieved through automation and digitization relating to the delivery of products to customers. This is across all our segments, not just it's Foreign Exchange, which today has -- delivers products, both digitally as well as physically. We've got leisure, which does the same thing. Our internal processes also have been automated to a significant aspect.

The last point I want to make is that our cash and cash equivalents stood at INR 1,000-odd crores, which is almost the same level as our pre-COVID 2019 number.

So we are back in business. We're generating cash. And I expect that in the coming quarters we have a fair degree of visibility which I will leave to Mahesh and Debasis to address. Thank you.

[Debasis Nandy, executive]

Thank you, Madhavan. This is Debasis, I'll just quickly highlight the financials for the quarter and for the year before I hand over to Mahesh.

So we have had a great year. For financial year '23, our income from operations grew by 163% from INR 1,946 crores to INR 5,011 crores. And we get into the business by business details of that in the course of -- in the next half hour or so.

Our costs remained under control, as Madhavan pointed out, leading to a very healthy EBITDA. If you look at our operating EBITDA, and I'll explain that in a minute, our operating EBITDA, as Madhavan pointed out, was about INR 277 crores. We had made a loss of INR 126 crores last year. But more importantly, this is even better than the prepandemic year of FY '20. In FY '20, we made an EBITDA -- operating EBITDA of INR 251 crores, which was at a margin around 3.6%. And this year, in the year it's -- despite the top line not being comparable to what it was in FY '20, our operating EBITDA is at INR 277 crores which is 5.4% EBITDA margin.

We'll keep on talking about operating EBITDA, and let me just explain why we qualify this. So there is an item in our financials which is given separately as a disclosure, which is a mark to market loss on investment. This is the holding that we have of shares in Quess Corp. These shares are not held by Thomas Cook. These shares are actually held by the Thomas Cook Employee Trust, which is a separate entity. However, for accounting purposes, this is clubbed as part of the stand-alone and the group.

The shares held by the trust are meant for allotment and distribution to employees over a period of time based on their ESOP, the way the ESOPs mature. So -- and this cannot be used for anything else. There has been significant change in values for the -- in the price of Quess shares within the year, leading to mark-to-market and we have to measure the impact of this on the overall value of the investment made by the Trust.

So this amount works out to a reduction in value, a notional loss of INR 35.3 crores. This was only foreclosed last year. So while we have to consider that as part of our EBITDA, it doesn't impact the operations in any way, which is why we are making a distinction in our conversation between operating EBITDA and the reported EBITDA.

As the volatility in the shares -- as the volatility in the shares in the question have stabilized, this amount is -- will become immaterial in the -- hopefully in the years to come. And also, the other factor that will influence this is as and when the ESOPs mature, these shares would be given out to employees and therefore we won't do the mark-to-mark valuation anymore.

Coming to the reported profit. At an EBIT level, we -- and this was reported EBIT. At EBIT level, we generated INR 117 crores against a loss of INR 258 crores, showing the turnaround that the business has had made. And as a PBT level, for consolidated business made a profit of INR 26 crores and with -- against a loss of INR 326 crores last year.

So all round improvement across. I will not take too much of time on this. The numbers are there in investor presentation which has been circulated to you. And let's talk a little bit more about the business and hand over this to Mahesh so that he can take you through that.

[Mahesh Iyer, executive]

Thank you, Debasis, and good afternoon, everyone. I will now quickly jump into the segmental numbers, and I think that's where the business' essence lies. So I'll kind of walk you through each of the segments that we have. And I'll kind of move you through the full year, that's FY '23 as well as Q4 FY '23.

To begin with Foreign Exchange, the segment that we have had a stellar year in the period that went by, FY '23. If you look at, income from operations grew almost 2x, from INR 110 crores to INR 246 crores. That's more than 100% growth as far as the revenue from -- income from operations is concerned. And if you look at the same number for the quarter, on a quarter-on-quarter basis, moved from INR 38 crores to INR 65 crores.

Now if I look at the profitability for the same period, it moved from -- for the full year FY '23, it moved from a loss of INR 3 crores in FY '22 to a profit of INR 72 crores. And from an income from operations point of view moved from about INR 110 crores to about INR 246 crores. So it's almost doubling in terms of income from operations and almost like 4x or 5x in terms of profitability.

But the underlying trend to this performance has been a very steady combat as far as volumes are concerned. For the FY -- full year FY '23, Foreign Exchange volumes are back to 82% of the prepandemic level, whereas for the quarter, that's Q4 of FY '23, the volumes are at 93%. So when I compare it quarter-on-quarter, we have seen improvement. But as you will know that the recovery to prepandemic in the previous quarters were lower. But for the full year, it stands at 82% and for the last quarter stands at 93%.

Now when you look at recovery within the segments of Foreign Exchange, the Retail segment is actually on top of the prepandemic level, we're at about close to 103% to the prepandemic level driven by the Student segment, which is operating at about 35% higher than what it was in the prepandemic level.

The travel and related segment of -- which is a part of the retail Foreign Exchange segment continues to be lagging. And it's about close to 75% kind of trailing the kind of numbers you would see in terms of travel.

If I look at the prepaid card business, which largely is reflective of the corporate movement that's happening, our prepaid portfolio has grown by about 80% as compared to the previous quarter -- comparable quarter for Q4 FY '23.

In terms of share volumes, we did about $81 million in Q4 of '22, and the same volume in the current year is at $141 million. For the full year, we are at about $550 million of prepaid card loads. And I think that's one of the best that we have done in a very, very long time.

If I look at the float that this business, we are sitting at about close to INR 850 plus crores of float, that's there as a part of the prepaid portfolio. Again, noteworthy here to mention is the digital transformation. Madhavan spoke about the investments that we have made there and how it's playing out for us. If I look at our digital adoption rate, which is customers coming and doing digital transactions from us, is at about 11% of our total retail portfolio. The B2B business that we conduct through the same digital route, we have about 10% option. So overall, about 20% or 21% of the overall retail business is actually happening through digital channels, and we continue to invest in it.

The recent directive from RBI in terms of e-KYC being enabled to authorized dealers like Thomas Cook, we believe, will allow us to further invest in the technology and reduce the friction that comes in completing the last mile fulfillment as far as the customers are concerned.

So clearly, from a growth perspective, Foreign Exchange is set well. We believe, as travel happens in the next quarter, which is traditionally the largest seasonal quarter for the Holiday business, we would see the recovery on the travel side of retail for Foreign Exchange, and that should add to the profitability going forward.

Coming to the segments on travel and travel and related services. Obviously, there are multiple segments in there. As you know, it comprises of Holidays which is B2C. We've got Holidays that is B2B that we call as MICE. It has got Corporate Travel, and we have got DMS, which is overseas inbound business as well as India inbound business. Each of them as Madhavan mentioned, are in different stages of recovery, and I'll try and give you a sense on each of those verticals.

To begin with, I think from a recovery point of view, overall recovery for the travel business stands about 78%. And this is an overall sum, which includes India inbound, overseas inbound as well as domestic international outbound.

Now if I break that up into each of the segments, to begin with some Corporate Travel, we are already trending, as we have been saying, in the last 2 quarters. Corporate Travel was very quick to come back, both from a volume and value perspective we are trending above the pandemic and we continue to see momentum in terms of the growth that we see in this business. This is also on the backdrop of new acquisitions or new clients that we acquired during the quarter, and they have started to trade full throttle in the current quarter.

Also important to mention here that the mix of business between international and domestic, which used to be skewed towards domestic in the previous quarter, has now found balance, and we are trending at similar ratios that used to be prepandemic, which is 60% international and 40% to domestic. The volume-wise, they are still 90-10, but in terms of value, International now accounts for about 60%.

From a yield point of view, this international traffic or international volumes augurs very well because that's what we make our margins. And clearly, the comeback on that volumes will add to our bottom line going forward.

Also to mention here that we are also doing some real high-tech integration in terms of technology for some of our large customers which will then eliminate the need of people related touch for transactions. As you know, these are current management services for large corporates, again, happens to be a little more people intensive.

But we are bringing in technology which then talks to the employee self-service portal that each of the corporates have, and that will kind of ease out the journey in terms of booking of tickets, booking of hotels, and more importantly, the way we invoice customers entire payments. So clearly, it's an end to end journey. We've started the pilot on it, which would pay a few of our customers and we expect to continue that journey going forward.

Coming to the B2B business of MICE, which is the Holidays. We've had a very good set of numbers, both from SOTC and Thomas Cook, the 2 brands that represent this business in the market. This in the backdrop of some large wins we have had. As you would know, we've been speaking about the government contract that we've got.

This is a new set of business segment that we have entered in, in the last 3 quarters. We managed the Khelo India group -- the Khelo India Games that happened in MP. We also won the mandate for the Khelo India Games that would happen in UP towards the end of this month. We are also 1 of the 3 vendors who provide services on the G20 event that's happening, including the World Tourism Council, that's going to happen in Jammu and Kashmir between the 22nd and 24th of May.

So clearly, the borrowing business has become a sizable portion of our MICE portfolio. It's a very profitable segment, makes us money, and we've kind of diversified our portfolio not only on the international side, but also on the domestic side.

Also important to mention here that on the MICE side, we brought in new technologies which automates a lot of processes more importantly because it involves dealers far and few, far from. And it's important that the entire process of collection of documentation, processing of Visa is all rooted to a centralized system. So we made a customer self-service apps enabled for these set of customers also, which have modern productivity benefits on the MICE side of the business.

Coming to the Leisure side of the business, again, from a recovery point of view, the overall business is about close to 65% recovery. But for the current quarter, you are seeing the recovery at or close to about 69%. Now you must also keep in mind that this quarter, which is the quarter that went by, Q4 FY '23, happens to be an investment quarter. So the volumes are strictly not comparable to the sequential quarter, which is the December quarter, purely because this quarter has the element of people not taking leaves because of exams and everything else. So we are now moving to normalcy where we have to factor in the seasonality of the business. So this is a seasonal investment quarter where we invest into our marketing initiatives.

But despite that I'm happy to report that both SOTC and Thomas Cook on the auditor business broke even, but actually made a marginal set of money. So a traditional investment product turned profitable for SOTC and Thomas Cook both.

From a volume perspective, international travel continues to grow. The long haul side of the business is beginning to come back and for the -- pipeline for April to June seems very strong. Europe continues to be a favorite destination despite the challenges on input costs and Visas and we see a very strong momentum for the European destination for the coming summers.

Last but not the least, to comment on the DMS side of it. I think across the Board, we've seen improvements. I think if I look at Desert Adventures out of Middle East, the volumes have come back. They actually reported profitability in the December quarter. The March quarter is relatively slower for them. But despite that, they came in much closer to a breakeven as far as their overseas business is concerned.

If I look at the Southeast Asia, I think that's where the recovery has been slower. That's purely because markets like Thailand and Bangkok opened much later during the year and the impact of China is not fully visible. China, as you will all know, opened only in February, and that impact of the business is still to come back. So we believe that both Southeast Asia, Dubai and Africa will start firing in the next quarter, and we will start seeing results of that into our businesses in the coming quarters.

Vikram, can I hand over to you, for Sterling, please.

[Vikram Lalvani]

Yes. Thanks, Mahesh. Good afternoon, ladies and gentlemen. My name is Vikram Lalvani, and I represent Sterling Holiday Resorts Limited as its Managing Director and Chief Executive Officer. I'm also joined by Mr. L. Krishna Kumar, the Chief Financial Officer of Sterling Holiday Resorts. It's a privilege once again to meet and interact with all of you this afternoon.

As you may recollect during the previous earnings call of 1st Feb '23 in Q3 FY '23, I indicated that Sterling is looking forward to closing this financial year of FY '23 with historic pathbreaking numbers. I'm delighted to announce the best ever performance of Sterling in FY '23. Our turnover was close to INR 370 crores. I mean EBITDA was INR 117 crores which is at [ 31% ]. This is a recovery of almost 6x on EBITDA terms over prepandemic period, precisely and about [ 42% ] increase and our growth of over 20% increase over FY '22. The operating free cash flow for FY '23 for the first time crossed INR 100 crores in Sterling and we closed INR 113 crores against INR 58 crores of FY '22.

For Q4, Sterling recorded a turnover of INR 89 crores and an EBITDA of INR 27 crores, which is [ 30% ] . Q4 is traditionally our nonseasonal quarter for Leisure. But despite that, our occupancy grew by 7%, close to about 62%. Our average rates also increased by about 9%, closing at [ INR 5,536]. this resulted in an overall revenue growth of almost 18% to 19% over the same period last year. For the quarter, Sterling recorded an operating free cash flow of INR 32 crores, which is about 125% growth over the same period of the previous year.

During the quarter, Sterling also debuted 2 destinations, Haridwar in Uttarakhand and Chail in Himachal and thus taking our portfolio strength to 40 resorts across 38 destinations and [ 2,500 ] keys as on 31st March 2023.

Now from a yield's perspective, what were the 3 most attributing factors to this change that has happened? One, our improved resort business, the spends in resorts have gone up, average room rates are up, occupancies are up and guest ratios are up.

Drive for efficiencies, our membership vertical has driven a lot of efficiencies, throwing up a lot of cost efficiencies through premiumization and variabilization of costs which were otherwise fixed. We also expanded our footprint across the country on an asset-light model, resulting in incremental revenues and new lines of businesses for the company.

I shall very quickly elaborate some of the key operating levers that resulted in this FY '23 performance. Our volumes are healthy and we maintained an occupancy of about 66%, which is up from 55% over FY '22. Our average room rate growth has been healthy -- very, very healthy, 21% over the previous year. We closed at INR 6,268 while surpassing the prepandemic levels by 43%. Prepandemic it was at INR 4,392.

Our improved volumes and average room rates resulted in group revenue growth of almost 74%, which is INR 150 crores in FY '23 from INR 86 crores in FY '22. Improved F&B, food and beverage business, by over 75% over the previous year. We've closed to INR 79 crores in food and beverage revenues in our results versus INR 45 crores in FY '22. And this is because of improved participation, improved spend and new lines of businesses in food and beverage that resulted in this growth.

The growth in guest occupancies and rates when compared to FY '22. Cost optimization exercises were also undertaken in 2020, and the cost lines continue to be maintained through FY '23.

In the membership business, the focus continues to drive profitable sales and maximizing yields and variabilizing fixed costs. With the continuous growth of our variable body of membership sales, to that effect, our on-site sales has -- was at 53% in FY '23 compared to only 38% in FY '22.

Higher down payments of 48% in FY '23 compared to 41% in FY '22 and 30% in prepandemic levels. So therefore, the higher down payments also has a direct correlation with improved operating free cash flow.

Strengthening the sales channels resulted in an improved average unit realization with a growth of almost 7% over the previous year.

Sterling has confidence that our buoyancy witnessed in FY '23 shall also have it's positive impact in FY '24. Sterling shall continue to ramp up its business profitability and most -- in a more scalable manner even while ending FY '24. The thrust shall continue to be on leveraging growth in the resort business, sustaining cost efficiencies started so far and bringing about a strategic portfolio expansion rapidly as we enter even FY '24.

In FY '23, Sterling added 6 new resorts across the country, Madurai in Tamil Nadu, Kalimpong in West Bengal, Tiruvannamalai in Tamil Nadu, Pench in Madhya Pradesh, Chail in Himachal and Haridwar in Uttarakhand. And we shall add on at least another 6 resorts in the first half of FY '24, all in an asset-light model.

Sterling Resorts is one the only hospitality chains to have launched a unique and proprietary distribution platform, what we call Sterling One in FY '23 that enabled Sterling --- channel partners across the length and breadth of the country and employees of corporate clients to access their inventory real time and make reservations at preapproved rates by a click of a button. This has enhanced our presence to 221 locations in India in FY '23 without corresponding addition of any fixed costs. This also resulted in an increase in room revenues of INR 28 crores in FY '23, and this platform shall be further enhanced in FY '24 to give even better results. Active participation in industry trade sales, we believe, also enhances brand presence. To that effect, Sterling has participated in several hospitality trade shows in Q4. And we will further strengthen Sterling's presence in the hospitality landscape in the country.

To conclude, we are extremely upbeat and buoyant for our outlook even in Q1 FY '24 as well as the remaining part of the financial year. Thank you so much.

[Debasis Nandy, executive]

That concludes the Sterling part. May I request Sir Ramakrishnan from DEI to come in present.

[Ramakrishnan Shankar, executive]

Good evening, everyone. This is K.S. Ramakrishnan, the CEO for DEI. Am I audible, everyone?

[Unknown Executive]

Yes, yes. We can hear you.

[Ramakrishnan Shankar, executive]

Great. So we have had a fantastic FY 2023. We've had, like the numbers safe, we've had a double growth -- double-digit growth from the previous year. And it's also been our finest and the most profitable year in the history of our existence from the beginning itself. From an Indian rupee perspective, I would put it that from INR 474 crores in FY '22, we've touched INR 810 crores in FY '23. Mind you, this growth has happened keeping the fact that China, Hong Kong and Macau was still not open for us.

As a year, it's been extremely not only good on revenue, but also on our EBITDA and profit. We've had the highest profit recorded in the year from our -- from all of our past performance years. Again, like Mahesh and the others said, we've also had a lot of cost control that has happened through pandemic that we continued through this process while we also had a lot of growth happening in the existing markets that we are operating.

Quite a few of our competition folded up their business in the last 2 years of pandemic, which we got an opportunity of picking up at a much better price, at a much better revenue share rate. That made us more profitable and more revenues had a growth too. As far as the year goes, the results are very clearly showing what we've done.

Talking about forward-looking, I think we have an even more exciting and interesting 3 years ahead of us as our plan goes on quite a few areas. From a growth perspective or a revenue perspective, I think we have 2 geographies that we are highly focusing on, on growth.

Saudi Arabia is opening up in a very big way. All of you must have heard about the amount of attractions and amount of tourism that Saudi Arabia is starting to attract in the next decade. We are ahead of the curve there. We are in -- we already are in the most wanted RFPs -- we have been invited in the most wanted RFPs of attractions out there, while you also secured 2 or 3 contracts for us in -- for the current year itself.

We have also a sizable growth planned at our other accounts signed up in the parties. Indonesia, in particular, has been -- it's one of our most profitable countries of operations where we have more than 4-odd locations opening in the next -- in this quarter as we speak. Malaysia and Maldives are another one where we've already opened 3 and 2 locations, and we have another half a dozen of them lined up in the next 2 quarters.

Along with this revenue growth in new geographies, there's also a sizable revenue growth in existing geographies. China opened up in March -- February, March. And April, we've had an outstanding April. So the way it looks like, China from our scheduled plan will be at least 2.5x higher than what we have thought -- what we have anticipated from a budgeting perspective. So China has opened in a very big way, both our key partners, Shanghai Disney and Universal Studios are showing in an attendance of excess of 10 million guests a year, which is what they were originally planned for. During the pandemic it all had dropped out between 2 million and 4 million. So we've seen a huge, huge uptake out there in China.

And the China was a challenging country for us for the last 3 years of pandemic. It's probably will become one of our most profitable countries in this coming year or year next. Along with that in the in current market rates we still hold our old position. We haven't lost a single contract, and we have been renewing every contract of ours with the exception of losing 1 in Abu Dhabi, which our competition took over. And unfortunately, the first 2 months results fortunately for us and unfortunately for them, doesn't seem to be even hitting 30% or less.

With all that looking good and great from a technology perspective, we also invested our time during the pandemic and post pandemic on upgrading and relooking at our entire solution, our technology solution for imaging. And we are now coming to the culmination of its benefits. The project is running probably more or less nearly on time with the anticipated delivery of 2 months, they're still within the reach.

So we'll be unleashing our technology solution called as Humminbird by the end of third quarter. And the benefits of that are going to be least giving us an efficiency level of at least 20% to 30% better off than where we were. It's also scheduled to reduce our cost on labor by at least about 10% to 12%. That would make our EBIT even better.

In fact, our last calendar year '22 EBIT has already risen to about 19% from our average of 8% to 9% when Thomas Cook acquired us. So that with this change of Hummingbird, we see that margins will be even more better going ahead.

Last but not the least, The Dubai Balloon. Finally, the balloon has gone live in March and it in the interest of weather has been winning. We've been doing extremely well. There are days where we have been having 100% occupancy on the balloon as well. Dubai has had bad weather for April and May. So that's why our challenges are more on the flying of the balloon in the weeks out there.

And as we -- even in our budget for the balloon are always a lower ones. So we are very excited looking for [indiscernible] we have been having a brilliant last year and are more exciting this year. The team is extremely excited about bringing in lot more businesses than we've ever thought before.

So with that, I'd appreciate and thanks for your patience on whatever I said. Thank you.

[Debasis Nandy, executive]

Thank you. Thank you, Ram. May I request Madhavan for the closing comments before we get into the question and answer.

[Madhavan Menon, executive]

I think I just want to reiterate what all of us have said that clearly, there has been a full recovery in terms of profitability from the pandemic. I believe that the upside is essentially recovering. The balance, which will take us beyond the pre-COVID levels, both in terms of demand as well as cost benefit.

I must also add that some of our destination management companies, especially in Southeast Asia as well as here in India, have been relatively slow in picking up. But just looking at the order book across all our segments, it's very evident that there is an upside from here. And therefore, I believe that we can expect better results across each of the group companies.

With that, I will end there and thank you for participating.

[Debasis Nandy, executive]

Operator, now open it up for question and answer.

[Operator]

[Operator Instructions] First question is from the line of Mithun Aswath from Key Advisors.

[Mithun Aswath, analyst]

Yes. I have a few questions. I just wanted to understand on the travel-related business, the EBIT margin even in the December quarter was only about 2%. And this quarter, it is flat. So I just wanted to understand what level of business or if we reach pre-COVID levels, I think on an annual basis, you used to do around INR 6,000 crores in the travel-related business. Just wanted to understand what level of profitability or EBIT can this business generate. Because this is the most sizable business but does not really deliver any profitability meaningfully despite revenues being close to INR 1,000 crores. I wanted to understand what are the reasons for that.

[Mahesh Iyer, executive]

Mithun, this is Mahesh here. Let me take that question, and I'll get Debasis or anyone else to butt in and clarify. To begin with, I think you must understand that the segment results that you're looking at here is a combination of multiple travel verticals here. One, as I mentioned during the course of my commentary, you have the B2C Holiday business, we have the B2B Holiday business we have the inbound business in India, we have the inbound overseas business, and we also have Corporate Travel business in India.

So if you look at it, it's a sum total of multiple units or, I would say, companies who are all getting consolidated herein. And each of them have their set of seasonality.

Also, you must bear in mind that when you look at the recognition of segmental revenue versus segmental profit, they are very different. Each of the segments are accounted for very differently because in the case of Corporate Travel segment, we're only taking the revenues, whereas in the case of Holiday segment, we have to take the entire value of sales into the revenue. Hence, if you look at the EBIT margins, it may not be the right way to look at it. Obviously, on a comparable basis, when you start comparing it year-on-year, you will start seeing this flowing through.

But clearly, for the current quarter in question, as Madhavan also mentioned, and I also elaborated during the course of our conversation, different businesses are at different stages of recovery. We expect the margins to be stabilizing on the EBIT margins on the business to be anywhere between 7% to 8%, and that's what we've seen. We expect that we should get there in the next quarter, which is where you will see a large -- large part of our outbound business firing in.

But then again, you will see the inbound business fires into the October, March quarter, so they will come back in that quarter. So you will see the seasonality in the event of it. And clearly, from a measurement point of view, it should not be a sequential quarter, but it should be a quarter-on-quarter comparison.

Debasis, you want to add to it.

[Debasis Nandy, executive]

Just to add to what Mahesh is saying. Traditionally, Q4 is also in what we call our investment quarter. Because this is a quarter which is -- where we spend a lot of money on marketing ahead of the busy season, which is between April and September. And this also happens to be a low season as far as the -- most of the travel -- most of the parts of the travel segments are concerned.

So we have -- the top line remains a little depressed, and the cost goes up because of the marketing spend, the benefits of which actually we'll reap in Q1 and Q2.

So as Mahesh said, he pointed out, if you look at our business quarter in sequence -- quarter-wise in sequence, you may not get the right flavor. You will not get the right flavor, let's put it this way. It has to be quarter-on-quarter in terms of last year versus this year because the business has very, very strong seasonality.

[Mithun Aswath, analyst]

Sir, I was just trying to understand, if we were to go back to prepandemic levels in the travel and travel related business and we get to a normalized level of business there. What sort of EBIT did that business also generate compared to what you were generating prepandemic which was more in the order of maybe around 2.5% to 3%? Is there a big delta potential? Because last quarter, you reported about 2% on about [ INR 1,100 crores ] top line. So just wanted to get a sense on that and whether you're targeting to get back to prepandemic levels in FY '24? Or will it take a little longer?

[Debasis Nandy, executive]

So quite definitely so. In fact, if you look at our FY '20, which is the last prepandemic year, our EBIT margin from the travel segment was about 2.4% for the full year, okay? We will do -- we have done quite a bit of work since then in terms of automation, which has led to increase in productivity and in terms of reduced reduction of our cost. Our cost transformation, as Mahesh and Madhavan both talked about, has been to the order of about 30% in -- across most of our companies.

Now all that would give benefit as the sales starts rising. You may have seen that our sales -- our travel sales at the overall level is still not comparable to what it was in the prepandemic phase. For example, the total travel segment sales was INR 5,742 crores in FY '19-'20 as opposed to about INR 3,600 crores. At overall about, say, about 65% to 70% for the full year.

Now this number is growing. And -- but our margins are also -- as our margins are at a better level than what it was earlier. So as we gradually inch up towards the INR 5,000 crore number, you see more and more profitability coming in.

So I'm quite confident. I do not want to give you a percentage number in terms of how much improvement in EBITDA. But we are very sure that there will be -- we will see more and more profits coming out of the travel segment in FY '23-'24. That's the current financial year.

[Madhavan Menon, executive]

And if I can just about to add to what Debasis said. It's also important to note that for the year-ended FY '20, some of the businesses that we have acquired, which is the overseas DMS, where we were -- when we acquired it, we realized that there has to be a lot of transformation that has to happen both from a business and cost optimization point of view. So all of that has taken place during the pandemic. And as they come back to full-scale business, the color of their profitability definitely changed and will add to the segmented profits in each of the units that we operate in the country.

[Debasis Nandy, executive]

In fact we have seen some of that happening already. I mean, as Madhavan was saying, Madhavan and later on Mahesh was mentioning, some of the overseas units, for example, and if I have to name them, some of them, Desert Adventures, which is Dubai best unit operating in the Middle East, Private Safaris in East Africa and the unit that we have in the U.S., Allied T Pro. All of them ended the year at all-time high in terms of sales. And all of them, which are -- all of them are loss-making in the year '19-'20. All of them have now returned --now come back to profitability, so which has added to the overall group profits.

Now going forward in FY'24, they will again -- we expected that these days, again, we expected that those are numbers they have posted last year. And therefore, it will add to the overall profitability of this segment.

[Mithun Aswath, analyst]

So can we safely say that FY '24 we will reach FY '20 travel-related revenue, INR 3,600 crores will go back to INR 5,700 cores or is that being too optimistic? And why would that especially one since the hospitality sector overall I think in the country has bounced back quite smartly. So I just wanted to understand that.

[Madhavan Menon, executive]

No, I think, Mithun, you're almost right. We are not saying that we will not reach back -- our internal estimates are that we will bounce back. As I said, different markets operate very differently, right? Like we saw, we expected China to open much faster, did not open the way it had to. So we had some setbacks there.

But clearly, if you ask me the position from here to the next 12 months, we definitely believe that we should surpass the prepandemic levels in most of the businesses that we operate in, specifically in the travel segments.

[Debasis Nandy, executive]

And as we said, ultimately, what matters is the profitability. And even if we -- hypothetically say that we don't reach 100% of FY '20 levels in terms of top line, it is much easier to reach that benchmark in terms of FY '20 benchmark in terms of profitability because of the improvements that we have done in productivity and cost management.

[Mithun Aswath, analyst]

Right. Right. Just -- I have a couple of more questions if that's fine. Your borrowing -- your finance costs are close to INR 90 crores, besides having quite a large cash pile. So I just wanted to understand how much of this INR 90 crores is linked to actual borrowing? And can your finance cost or interest costs come down? And what is your cost of borrowing?

[Debasis Nandy, executive]

That's a good question, actually. So -- and thank you for asking that. So if I look at our -- the interest and finance charges, the overall numbers are INR 89 crores in this year as compared to INR 60 crores -- roughly about INR 61.6 crores last year.

Now there are 3 components in this. One component is pure interest which is on loans, short and long term. And that has gone up from INR 24 crores last year to INR 33 crores in the current year. And that -- the INR 9 crore increase is largely due to the one long-term loan that we took during the year, which is -- under ECLGS scheme of the government. That's about INR 150 crores of loan that we have taken during the year.

The balance is on account of 2 -- there are 2 other elements to this. One element is the lease rentals, okay? So there is an interest element on lease, which in terms of accounting has to be accounted for what has to be classified under the interest and finance charges. Now that amount is about INR 13 crores in 2022. And in FY '23, it's about INR 12 crores. So more or less the same. So there is no change in that. And that will continue to be because we have a lot of shops and offices which are on lease, so which will continue to -- the INR 12, INR 13 crore number will continue as a base number.

We are not opening -- we are not planning to open any new branches or shops, and therefore, we don't expect any change in this number. The rest of it, which is an amount of INR 43 crores in the current year and INR 24 crores in the year before pertains to what we call finance charges. Now these can be various things. These can be the bank charges that we pay for the bank guarantees that we issue. The credit card charges that you -- that we have to pay for collections. The -- when we do -- when we collect payments to net banking, et cetera, there are some gateway charges that we pay.

And of course, when you do the -- on the Foreign Exchange -- in the Foreign Exchange business, we do import and export our physical currency as we call that exiting -- there are some bank charges relating to that, we call export import charges or exiting charges. So all of this finds shelter under this heading called financial charges.

This amount went up from INR 24 crores to about INR 43 crores this year. This actually reflects the increase in the volume of the business. If you see the corresponding period, our income from operations went up from INR 1,888 crores in FY '22 to INR 5,047 crores in FY '23. And the finance charges are connected to so this almost tripled. The finance charges are really connected to the volume of the business.

Now will this continue the same proportion, increase the same proportion? Not really because some part of this will be -- will tend to -- it will not move up directly. It will move up in proportion, but it will not be in direct proportion.

For example, the finance charge, the INR 24 crores as a percentage of income from operation was 1.2% last year. This is now 0.8%. So we expect that this will -- there will be some variability, and this will keep on going down as a percentage of the overall number. But we cannot sort of wish it away.

Also, as you know, we have used a significant part of the business online. So a lot of our sales are happening online and consequently a lot of our collections are happening online. And therefore, charges like this, the bank charges will, keep on coming. But I won't -- this is connected to the volume of the business. And therefore, it brings in the necessary [indiscernible]. Does this answer your question?

[Mithun Aswath, analyst]

Yes, I just wanted to understand, since you have net cash, I think, to the order of INR 500 crores even if I net off the borrowing, I'm just trying to understand, is your -- the income that you earn on the extra cash, where is that going? And is that more than the interest outgo? I'm just trying to get a sense of why would you have borrowings or large finance cost if you have surplus cash. So I just want to understand. And where are you utilizing that cash?

[Debasis Nandy, executive]

So, Mithun, let me let handle that question. So our overall cash is roughly about -- at the group level is roughly about INR 1,000 crores as Mahesh and Madhavan have talked about. Now that lies in various different buckets. It's not -- all of it is not lined as freely available cash. It also includes the float that we have on the prepaid cards. And that prepaid card float can be used for various things. But it will remain in that it is and we do want -- we put -- we do put that in our fixed deposit. These are lined in foreign currency. So we do put part of that in our foreign currency fixed deposit and do earn some income on that. And that accounted for us as part of our other income. So that's there.

Also, being a business, being a ForEx business is one of the largest businesses and therefore cash also forms effectively like -- a bit like an inventory, if I can call it that way. It was Foreign Exchange business. And there will always be some amount of cash lying either physically or in the form of nostro accounts, et cetera.

Now where is the opportunity? So can -- when is the opportunity of using this? Is it -- so we -- one is, of course, in paying loans. So if you look at -- look at the balance sheet, we find that our short-term borrowings have come down very, very substantially in March in the -- especially at Thomas Cook where most of the cash is lying. Our short-term borrowings are at a very low level. But we do have INR 150 crores of long-term borrowing in Thomas Cook and in one other company, which is ECLGS, which is taken for -- it's a 6-year loan. And therefore, we can't really prepay that.

We also have some longer-term loans in our overseas company where we use it for -- where we have it for some -- handling some acquisitions, which is taken prepandemic. We are paying it off over a period of time. So that also will continue to stay.

The cash flow -- the float balances can be used for various things. One way of using that, obviously, is to do a swap into INR and use it to manage our business better. The swap cost is always cheaper than the short-term debt or overdraft, and we use that money to manage our interest cost.

[Mithun Aswath, analyst]

Just one last question on the DEI business. In the current quarter, we saw quite a dramatic fall in the EBIT compared to the December quarter despite revenues being more or less in line. So just wanted to understand any particular reason for this fall in the profitability.

[Debasis Nandy, executive]

Ram, may I ask you to answer that question on the quarter performance? Sorry, Ram, are you there?

Okay. Let me -- I mean, I think Rama has dropped off on the call, but let me try and answer that question. So in the current quarter, we saw some changes in the way the costs are structured. One major thing was that the China business, which was -- which is slow moving throughout the year and dormant at times, came back from some time in February with the -- as COVID moved -- as China got out of its COVID problem, the business came back. So the part -- we have substantial -- we have substantial business in China, 2 major parks, one in Beijing and the other in Shanghai Universal Studios and Disney Shanghai, respectively. These 2 came back in operations.

Now when it came back in operations, these 2 typically are parts where the -- there is -- the share of revenue that we have to give to the park is on the higher side, higher side in the sense higher than the normal average as compared to what we do in other parts of the world like, for example, in Dubai where most of our business located. That increased the overall cost as a percentage of revenue.

At the same time, the business in the -- towards the end of March, et cetera, as summer started setting in, the Dubai business also started getting affected.

So between the two, there was an mismatch in cost and revenue. This will get corrected over time. There is no need to -- it's a short-term thing, which has happened for about 1 month or 1.5 months to offset the balance of it but we don't see that as an issue.

In addition, as Ram pointed out during his presentation, The Balloon in Dubai has just started off it's -- in the month of March. So most of the -- as the summer wins in Dubai, this business will come into full swing. And we'll see more and more profits coming out of the year.

[Unknown Executive]

Yes. There was -- so just to add to Debasis point, mainly is onetime costs that had been borne upfront both in China and The Balloon hit us between -- in March. And you will see that correction -- we're already seeing the correction in April. So I can assure you that, that was going to be a timing issue, nothing more than that.

[Operator]

The next question is from the line of [ Aditya Kumar from LMR. ]

[Unknown Analyst]

So I have only one question. Like on the ForEx card business, that is when a person tops ups in the card then -- of any foreign currency, then due to currency fluctuation, who bears that risk of the currency payment the company or the customer that comes after -- that comes in between when the top-up is made and the money is used?

[Mahesh Iyer, executive]

Let me take that question, Mahesh here. So clearly, we don't have any open position as well as the prepaid product is concerned because let me try and walk you through a flow of the transaction. If we were to come to my counter and buy a card for $1,000, you've got to pay me rupee equivalent for $1,000 and let's say, that's INR 80 to INR 82.

So you will pay me INR 82,000 and I would do a back-to-back cover for that transaction. And at the same time, the money will be transferred to a foreign currency account, which is what we call as an offshore account and will be part of the float.

And if you go on to the call, you would have heard Debasis talking about the float balance in foreign currency. So effectively, this goes and sits in the foreign currency account and as foreign currency balances. And when we talk about float, we convert that into rupee and talk about a rupee balance.

Now these floats that are in foreign currency are not kept idle but are deployed either for working capital through a swap mechanism or parked in long-term FDs, depending on the cycle of payment that we need to do to the merchants when the card are being used.

Now at no point in time there is any exposure on this because it's a completely hedged transaction at every level of the transaction. I hope that clarifies.

[Unknown Analyst]

Yes. So it's -- when the transaction takes place, the price gets locked in, right, if I'm not...

[Mahesh Iyer, executive]

Aditya, we follow that across the board. All our Foreign Exchange transactions are fully hedged at the origination of the -- on conservation of the transaction.

[Operator]

The next question is from the line of [indiscernible] from Arihant Capital Markets.

[Unknown Analyst]

I only have one question. In your Q4 consolidated statement, there is an item of other income -- I mean, sorry, other expenses of more than INR 136 crores which is absolutely high about 15% sequentially and 135% annually. Can you elaborate on why that is and what the constituents of that are?

[Debasis Nandy, executive]

Thanks for the question. So if you look at the beginning of that, it's -- a lot of it, as we mentioned, some -- this quarter is an investment quarter where we spent a lot of money on marketing in anticipation of the business or rather to service anticipated business in Q1 and Q2 of the following quarters -- the following year. So the marketing expenses fits in others because that's there's no other place to keep it in a semi mandated format. That's one reason for -- that's the main reason for these expenses to go up.

We also got access to -- during this period, we also set up additional counters, new counters at additional airports, details of which are given in the investor presentation. And there are fixed airport rentals that kick in from the time we start applying those counters and those have also added to the cost.

[Operator]

[Operator Instructions] The next question is from the line of Senthil Manikandan from [ iThought PMS]

[Senthil Manikandan, analyst]

Just first question from the PCS side. What's your overall take on the new [ PCS ] regulation by the government and how it will impact our travel business?

[Mahesh Iyer, executive]

Senthil, again, look, I would think it's a little overload in that sense to say the impact of PCS. You must realize that it's not 20% because the 5% always existed. So the incremental value is only 15%. That's point number one.

Point number two, I think it's not the cost, but it's basically, I would say, upfront payment or upfront money that's getting blocked. And we believe a lot of segments of customers who travel with us and across the industry belong to either the MSME, SME or for that matter proprietorship and partnership where there is some advanced tax payments that they do. And we have an opportunity to offset this at the end of every quarter.

Thirdly, I think from a diversified portfolio point of view that we see in our Holidays business, we service short haul, we service long haul and we service domestic. So in the very shortest possible time, you will see some amount of reaction where people will want to understand how it operates and actually see the mechanism of claiming the credits working for about a quarter where the demand will probably shift to more short-haul and domestic destinations where the amount of money that one will need to block on account of this 15% will not be very large.

And very soon, which is the winters, which would step in much later in the next quarter, there will be normalcy returning to the market and people will see that this is only upfront cost and nothing more. So we don't anticipate anything much to be dramatically changing because this is available for a person to claim at the end of each quarter. So to that extent it will be neutral.

Also to mention here the announcement that happened on the credit cards part of it in the last 48 hours actually creates a more level playing field for us because that is one segment which was outside damage and would have led to people actually using credit cards to make payments which [indiscernible].

So clearly, I think by closing that loop and bringing it under the LRS ambit kind of closes that loop. So there is a level playing field and we believe it's going to be that much more because the appetite for customer travel has not changed. If you were to use the word revenge travel, people are traveling. And I don't think if it was 5% or 20%, it's going to change because when 5% happened in October of 2020 we saw a similar [ bit of flurry ] in sentiments in the market. But in about the quarter's period, which is about 3 months, we saw people accepting this. So we don't expect too much of things to change in the marketplace.

[Senthil Manikandan, analyst]

Second question is the deal entities. So if you can provide what would be our overall operating profit that you generated last year prepandemic level and what could be our expectation going forward in terms of -- at least with respect to DMS entities?

[Unknown Executive]

You have to move the PCI...

[Debasis Nandy, executive]

So on the DMS entities, see, prepandemic, which is the year '19-'20, as you mentioned that almost all of them were loss-making. We had bought them -- just to go back a bit. We have bought them in the year FY '18. And we bought them at a very low value, primarily because of the fact that they were making loss -- or they were making losses. That's the reason they were getting sold in any case.

So our immediate task was to take them over and turn them around through the structure, through some amount of restructuring motor restructuring and automation.

We got interrupted a bit by COVID, but we achieved that during the COVID period. And now they are -- they've reached the level of automation as desired and which is we are -- which is why the productivity is much more. The markets where we have opened up early like, for example, Dubai or rather Middle East, Africa and U.S.A., they must have already logging in profits. The markets which opened up later, Thailand, Indonesia, Vietnam, so on and so forth, which is the Asian market, they are still under losses, but they are expected to recover and start becoming profitable in '23, '24.

So in short, we expect the DMS businesses as a group to be completely profitable going forward. The other part of DMS or at least also the inbound business that is there in India, which is posted on a company called Travel Corporation of India or TCI.

Now TCI was not in operation for about 2, 2.5 years during COVID. We started operations some time in November. This quarter, the Q4 has been a profitable quarter for them. Although they are only about 40% of the pre-COVID volumes, which is expected because this was affecting the first full quarter they had.

Going forward, the volumes will start going back towards where they were. At the overall margin level, I think the operating margin level, the inbound businesses, whether in India or abroad, earn something like about our gross margins in the range of over 16%, which is a different gross margin.

One area where we are making some additional margin was on the -- was on an SEIS scheme, which -- SEIS scheme that the government had floated and which is valid till about 2021, where some sort of subsidy time call that was being given for export earnings. Unfortunately, that scheme has now been suspended. It's no longer there. So that would reduce the profitability of the Indian unit. However, that will be more than made up by the profits of the overseas units.

[Senthil Manikandan, analyst]

Great. And just one suggestion. I think in the presentation, if you can, going forward, some more details split up on the DMS entities it would be great within the travel segment?

[Debasis Nandy, executive]

We'll work towards that. Thank you. Thank you for the feedback.

[Operator]

The next question is from the line of Shashank from [ Crescentia Strategists ]

[Unknown Analyst]

My question is regarding Sterling Resorts. I wanted to understand first thing is that how do we compare ourselves with the absolute member number as compared to the competition which is also a listed space?

And the second subsequent point to the same is that how do we -- are the occupancy of the rooms because we are much below in terms of occupancy? And is it comparable to prepandemic? Or how do we have to look at the numbers? Because there also we are much below the expected as of the competition is concerned.

[Unknown Executive]

Vikram?

[Vikram Lalvani]

Yes, I'm just taking that. So let me just answer the first part of the question. Sterling has adopted a hybrid model of operation. And in our case, what happens is -- based on how the market scenario is moving, we have that flexibility to optimize between the results of the membership, number one. Number two, we have in terms of a total number of members approximately about 80,000 members since the inception of Sterling in 1986 of which about 33,000 -- up to 35,000 are actively holidaying with us, number two.

Number three, even as an approach going forward, our approach is very clear in terms of premiumization of these memberships. That means, I'm not chasing volumes. I'm not chasing units. I'm not chasing numbers. But I'm chasing them effectively and profitably. So that they stick with us for the time duration that we have.

For example, I'd mentioned that the down payments are up. So when a person has paid you a down payment of 70%, 80%, the ability for that person to repay the loan.

Number two. We -- when you say premiumization, we are actually giving those customers a better experience both at our resorts as well as through an end-to-end cycle and we will continue to strive that. And number three, is that it's a far more profitable way of doing business rather than actually chasing in terms of number of units.

So our approach is very clear. We will continue to premiumize the membership business and optimize between the segments that we have, and we've done so and which is why we've seen a 6x and above change even over prepandemic levels, number one.

Number two, as far as the occupancy is concerned, the occupancy in FY '19-'20 was about 64%. And what we've actually closed with is about 61%, right? So there is an opportunity in the overall occupancy.

But having said that, we also measure the guest ratio. Our guest ratio has actually gone up, which has a direct significant impact on the turnover. So the guest ratios which were typically about 35% to 40% prepandemic has gone up to 60% to 65%. Over 60% yes, 60% to 63% in the current financial year. So there is a chance to optimize that even further.

Number three, our leisure business is highly seasonal. So the months July, August, Jan, Feb are extremely low months. The months of April and May are extremely high months. So therefore, even in the past and sometimes we also do face situations where several destinations are cut off because of heavy rate. It has happened in Kerala before. It has happened in Himachal before. So these -- those times, we are now able to actually fill up the inventories there.

So as a result, if you look at it from a pure leisure business, I think 60% to 65% is a good scope. And we optimize to at least 65% to 68%. Yes, it can be optimized 65% to 68% for sure. And that's what we are also working toward. So we are seeing an upward trajectory there as well. We balance out the occupancies on yields and the rates. So to ensure that we actually maximize revenues in the period and for that year. I hope that answers your question.

[Unknown Analyst]

Yes, to a certain extent. So my second and the last question is that now how do we compare with -- as what you've been telling for last couple of minutes that premiumization is the core for your business is concerned. So again, coming back to the question, the profitability of your unit as compared to the peer, is it much better or because what I understand is, it is not. So how do you explain that particular thing when you're doing all the steps which you have spoken out? Still the profitability as compared to the listed PRR are not there?

[Unknown Executive]

See, on the membership profitability alone, if you look at. Ours is a blended business, we have resorts which are generating around 35% operating margins, and we have membership business also generating certain margin. The membership margins are marginally higher than the resorts business and therefore we are profitable as far as membership is concerned much more than the resorts vertical. But we're on a lower value scale. So that is definitely to be noted.

And in terms of base, I think we have a smaller base than compared to our peer numbers. I think our peer members have larger base. And therefore, the AAC/ASF Collection for them would be much on a larger scale, and therefore, not directly comparable as far as that is concerned.

[Krishna Kumar]

This is Krishna Kumar from Sterling. So the point to note on the occupancy is something which I want to add to our system already as mentioned is over the prepandemic to the current year, we also had resorts and rooms. So we actually added around 50,000 room nights over the period of 3 years, and those have come up in hill stations and various other locations and occupancy is also catching up.

And while we are reporting a 16-plus from an occupancy over the year there are months in the year where we also touched 90% and beyond. And in the weekends we also do 100% capacity in some of -- many of the weekends in the April, May months also. So that's something which I want to add to what Vikram already mentioned.

[Debasis Nandy, executive]

Thank you very much, Akul, probably over shift the time limit. So I don't see any more questions coming up. Maybe you can close now. Hello, Akul, are you there?

[Akul Broachwala, analyst]

Yes, we can close the call. Thank you so much for the management. And Madhavan would like to say something as closing remarks.

[Madhavan Menon, executive]

Thank you, everybody, for joining the conference. If there are any more clarifications, please reach out to Debasis Nandy. His numbers are available or e-mail address, and we will happily respond to any queries that you may have. Or direct it to whichever companies you may have questions relating to that. Thank you very much.

[Operator]

Thank you. On behalf of IIFL Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.