Thomas Cook: A Demerger with Hidden Value

Thomas Cook (India) is often seen as a travel company, but it also combines travel, foreign exchange, digital imaging and hospitality. The proposed demerger of Sterling Holiday Resorts could help investors value these businesses separately and remove the “conglomerate discount”. In FY26, forex generated ₹326 crore revenue and ₹149 crore EBIT, a 46% operating margin. Forex turnover was ₹13,300 crore, up 8%. Since FY21, forex revenue has grown at about 25% CAGR and EBIT at nearly 60%. Its prepaid forex float stood at ₹1,600 crore, helping generate ₹92.9 crore of interest income. Sterling is another major value driver. It recorded ₹534 crore revenue and ₹175 crore EBITDA in FY26, with a 33% margin. It is debt-free with around ₹340 crore cash. In Q1FY27, occupancy jumped to 77%, room rates rose 10% to ₹7,809 and RevPAR increased 20%. Revenue rose 21% to ₹170 crore and EBITDA rose 21% to over ₹62 crore, with a 37% margin. Shareholders are expected to receive 0.81 Sterling shares for every Thomas Cook share. The continuing Thomas Cook business will retain travel, forex and digital imaging. Digiphoto remains a weakness: Q1FY27 revenue fell 38% to ₹131 crore and EBIT swung from a ₹10.6 crore profit to a ₹15.2 crore loss. For shareholders, the demerger can help each business attract the right investors and get sharper management focus. At ₹112 a share, market value was about ₹5,252 crore, with estimated unencumbered net cash of ₹771 crore. A sum-of-the-parts approach suggests potential undervaluation of 8%-38%. the demerger may take until Q1FY28. This may improve transparency and valuation. Success depends on Sterling improving occupancy and profits, forex sustaining growth and Digiphoto recovering. If these happen, separating the businesses could unlock meaningful shareholder value.