The ₹5,588 crore market capitalisation company, which operates in the tour and travel related services sector, is grappling with profitability challenges despite modest revenue growth. The sharp contraction in net profit margin from 3.40% in Q2 FY26 to 2.09% in Q3 FY26 highlights deteriorating operational efficiency. With the stock now trading 38.47% below its 52-week high of ₹188.45 and hovering near its 52-week low of ₹114.25, investor confidence has been severely dented.
The company's performance in Q3 FY26 stands in stark contrast to the robust growth trajectory witnessed in previous quarters. Whilst net sales registered a modest 3.46% sequential growth to ₹2,145.68 crores, the inability to translate this into bottom-line growth raises concerns about cost management and operational leverage. The quarter also witnessed an unusual spike in tax rate to 24.77% compared to 35.77% in Q2 FY26, though this provided limited relief to the overall profitability picture.
| Quarter | Dec'25 | Sep'25 | Jun'25 | Mar'25 | Dec'24 | Sep'24 | Jun'24 |
|---|---|---|---|---|---|---|---|
| Net Sales (₹ Cr) | 2,145.68 | 2,073.84 | 2,407.96 | 1,968.86 | 2,061.01 | 2,003.76 | 2,105.94 |
| QoQ Growth | +3.46% | -13.88% | +22.30% | -4.47% | +2.86% | -4.85% | — |
| Net Profit (₹ Cr) | 41.70 | 66.44 | 72.05 | 64.57 | 49.58 | 64.89 | 75.29 |
| QoQ Growth | -37.24% | -7.79% | +11.58% | +30.23% | -23.59% | -13.81% | — |
| PAT Margin (%) | 2.09% | 3.40% | 3.05% | 3.22% | 2.26% | 3.57% | 3.47% |
| Operating Margin (%) | 5.33% | 5.22% | 5.25% | 4.99% | 5.62% | 6.21% | 6.46% |
Financial Performance: Margin Compression Undermines Top-Line Growth
Thomas Cook (India)'s Q3 FY26 performance reveals a troubling disconnect between revenue growth and profitability. Whilst net sales grew 3.46% sequentially to ₹2,145.68 crores and 4.11% year-on-year, the consolidated net profit collapsed 37.24% quarter-on-quarter to ₹41.70 crores. The PAT margin contracted sharply to 2.09% from 3.40% in Q2 FY26, marking the weakest profitability in recent quarters barring the December 2024 quarter.
The operating profit before depreciation, interest, and tax (excluding other income) stood at ₹114.47 crores, delivering an operating margin of 5.33%, marginally up from 5.22% in Q2 FY26 but significantly lower than the 6.46% achieved in June 2024. This persistent margin compression over the past three quarters signals structural challenges in the company's cost management and pricing power.
Employee costs surged to ₹298.36 crores in Q3 FY26 from ₹279.73 crores in Q2 FY26, representing a 6.66% sequential increase that outpaced revenue growth. This disproportionate rise in personnel expenses, coupled with elevated depreciation charges of ₹41.45 crores (up 5.77% QoQ), eroded profitability despite relatively stable interest costs of ₹24.21 crores.
On a nine-month basis (April-December 2025), the company reported consolidated net profit of ₹180.19 crores on revenues of ₹6,627.48 crores, translating to a PAT margin of 2.72%. This compares unfavourably with the full-year FY25 PAT margin of 3.12%, indicating a declining profitability trend that warrants close monitoring.
The profit before tax for Q3 FY26 stood at ₹59.64 crores, down 45.69% from ₹109.80 crores in Q2 FY26. The gross profit margin improved marginally to 4.71% from 7.18% in the previous quarter, though this metric has shown significant volatility across quarters. The tax rate of 24.77% in Q3 FY26 provided some relief compared to the 35.77% rate in Q2 FY26, though this appears to be an anomaly rather than a sustainable trend.
Critical Concern: Non-Operating Income Dependency
Other income of ₹40.93 crores in Q3 FY26 constituted 45.61% of profit before tax, highlighting an unhealthy reliance on non-core income sources. This dependency on other income to prop up overall profitability raises questions about the sustainability of earnings from core travel operations. The company's operating profit excluding other income stood at just ₹114.47 crores, barely sufficient to cover interest and depreciation charges totalling ₹65.66 crores.
Operational Challenges: Quality Concerns and Weak Returns
Thomas Cook (India)'s operational metrics paint a concerning picture of a business struggling to generate adequate returns on capital. The company's average return on equity (ROE) of 6.09% over recent years falls well below industry standards and peer performance, indicating inefficient utilisation of shareholder capital. The latest ROE of 10.19% for FY25, whilst an improvement, still lags significantly behind competitors such as IRCTC (32.71%) and BLS International (24.97%).
The average return on capital employed (ROCE) of 4.05% is particularly alarming, suggesting that the company generates barely adequate returns on the total capital invested in the business. The latest ROCE of 17.63% for FY25 shows improvement but remains modest for a capital-light services business. The weak EBIT to interest coverage ratio averaging just 0.01x over recent years highlights the company's struggle to generate sufficient operating profits to comfortably service its debt obligations.
On a positive note, Thomas Cook (India) maintains a relatively healthy balance sheet with minimal debt. The debt to EBITDA ratio of 1.01x and negative net debt to equity of -0.28 indicate the company is a net cash entity. As of March 2025, long-term debt stood at ₹99.39 crores against shareholder funds of ₹2,259.61 crores, providing financial flexibility. The company's cash position strengthened to ₹795.00 crores as of March 2025 from ₹585.00 crores a year earlier, supported by robust operating cash flows of ₹717.00 crores in FY25.
However, the quality assessment reveals significant concerns. The company's quality grade of "Average" reflects long-term financial performance that meets basic standards but lacks the excellence required for a premium rating. The sales to capital employed ratio of 2.01x suggests moderate asset efficiency, whilst the dividend payout ratio of just 8.32% indicates management's cautious approach towards shareholder returns, possibly reflecting concerns about future cash generation.
Balance Sheet Strength: A Silver Lining
Despite operational challenges, Thomas Cook (India) maintains a robust balance sheet with zero promoter pledging, positive operating cash flows, and a net cash position. The company generated ₹717.00 crores in operating cash flow during FY25, demonstrating the underlying cash-generative nature of the travel business. Total current assets of ₹3,594.58 crores as of March 2025 provide adequate liquidity to meet current liabilities of ₹3,892.47 crores, though the working capital position requires careful monitoring.
Industry Context: Travel Sector Recovery Losing Momentum
The travel and tourism sector in India has witnessed a strong post-pandemic recovery, with demand normalising across leisure and corporate travel segments. However, the momentum appears to be moderating as evidenced by Thomas Cook (India)'s decelerating growth trajectory. The company's 4.11% year-on-year revenue growth in Q3 FY26 marks a significant slowdown from the 14.34% growth achieved in Q1 FY26, suggesting that the pent-up demand surge may be waning.
The competitive landscape in the travel services industry has intensified with both traditional players and new-age digital platforms vying for market share. Thomas Cook (India) faces competition from well-capitalised peers such as IRCTC, which benefits from its railway ticketing monopoly, and emerging online travel agencies that operate with lower cost structures. The company's 5.33% operating margin excluding other income compares unfavourably with the superior profitability metrics of peers, indicating pricing pressure and market share challenges.
The company's underperformance relative to the broader Tour, Travel Related Services sector is evident in its one-year stock return of -19.23% compared to the sector return of -8.79%, resulting in a negative alpha of -10.44 percentage points. This relative underperformance reflects investor concerns about the company's ability to capitalise on industry growth opportunities whilst maintaining profitability.
From a market positioning perspective, Thomas Cook (India) ranks fifth among its peer group with a market capitalisation of ₹5,588 crores, significantly trailing leaders such as IRCTC. The company's historical brand recognition and extensive distribution network provide competitive advantages, but these must be leveraged more effectively to improve operational efficiency and profitability metrics.
Peer Comparison: Valuation Discount Reflects Operational Weakness
Thomas Cook (India)'s valuation metrics reveal a significant discount to peers, reflecting the market's concerns about its operational performance and growth prospects. The company trades at a price-to-earnings ratio of 22.65x compared to the industry average P/E of 40x, representing a 43% discount. However, this valuation discount appears justified given the company's inferior return on equity of 6.09% compared to the peer average of approximately 23%.
| Company | P/E Ratio (TTM) | P/BV Ratio | ROE (%) | Dividend Yield (%) | Debt to Equity |
|---|---|---|---|---|---|
| Thomas Cook (India) | 22.65 | 2.31 | 6.09 | 0.39 | -0.28 |
| IRCTC | 37.26 | 11.66 | 32.71 | 1.45 | -0.67 |
| TBO Tek | 71.35 | 11.44 | 18.20 | — | -0.88 |
| BLS International | 20.54 | 5.81 | 24.97 | 0.33 | -0.52 |
| Le Travenues | 154.01 | 13.25 | 7.03 | — | -0.48 |
| Easy Trip Planners | 34.84 | 2.76 | 30.06 | — | -0.06 |
The price-to-book value ratio of 2.31x for Thomas Cook (India) stands at a substantial discount to peers such as IRCTC (11.66x), TBO Tek (11.44x), and Le Travenues (13.25x). This valuation gap primarily reflects the company's inferior return on equity profile. Whilst Thomas Cook (India) generates an ROE of 6.09%, market leaders such as IRCTC deliver ROE of 32.71%, justifying their premium valuations through superior capital efficiency.
The dividend yield of 0.39% for Thomas Cook (India) compares unfavourably with IRCTC's 1.45%, though it marginally exceeds BLS International's 0.33%. The modest dividend payout ratio of 8.32% suggests management's preference to retain capital for business reinvestment, though the low ROE raises questions about the efficiency of such capital deployment.
From a leverage perspective, Thomas Cook (India) maintains a conservative balance sheet with negative net debt to equity of -0.28, indicating a net cash position. This compares favourably with peers and provides financial flexibility for strategic initiatives. However, the company has failed to leverage this balance sheet strength to generate superior returns, resulting in the valuation discount persisting despite the financial strength.
Valuation Analysis: Attractive Entry Point or Value Trap?
Thomas Cook (India) currently trades at what appears to be an attractive valuation on traditional metrics, with a P/E ratio of 22.65x representing a 43% discount to the industry average of 40x. The price-to-book value of 2.31x and EV/EBITDA of 10.68x also suggest the stock is reasonably valued relative to its asset base and cash generation capabilities. However, the critical question is whether this valuation discount represents a genuine opportunity or a value trap reflecting fundamental business challenges.
The company's current market price of ₹115.95 stands near its 52-week low of ₹114.25 and 38.47% below its 52-week high of ₹188.45, indicating significant price correction. The book value per share of ₹36.09 suggests the stock trades at approximately 3.2 times book value on a standalone basis. The proprietary valuation assessment grades the stock as "Attractive," a status it has maintained with some fluctuations since October 2025.
However, the valuation discount appears justified when considering the company's operational performance. The declining profitability trend, weak return ratios (ROE of 6.09%, ROCE of 4.05% on average), and deteriorating margins suggest the business faces structural challenges. The sharp 37.24% quarter-on-quarter profit decline in Q3 FY26 and the company's reliance on non-operating income (45.61% of PBT) raise concerns about earnings quality and sustainability.
Based on the company's trailing twelve-month earnings per share and current profitability trajectory, a fair value estimate of approximately ₹140-150 per share appears reasonable, implying 21-29% upside from current levels. However, this estimate assumes stabilisation of margins and return to historical profitability levels, which remains uncertain given recent trends. The risk-reward profile tilts towards caution until the company demonstrates consistent improvement in operational metrics.
Shareholding Pattern: Institutional Confidence Building Gradually
The shareholding pattern of Thomas Cook (India) reveals a stable promoter base with gradual improvement in institutional interest, though overall institutional holdings remain modest. Fairbridge Capital (Mauritius) Limited maintains a steady 63.83% promoter stake with zero pledging, providing governance stability and alignment with minority shareholders. The absence of promoter pledging is a positive indicator of financial health and confidence in the business.
| Shareholder Category | Dec'25 | Sep'25 | Jun'25 | Mar'25 | QoQ Change |
|---|---|---|---|---|---|
| Promoter Holding | 63.83% | 63.83% | 63.83% | 63.83% | 0.00% |
| FII Holding | 7.28% | 5.32% | 4.41% | 4.52% | +1.96% |
| Mutual Fund Holding | 6.26% | 6.17% | 6.60% | 6.90% | +0.09% |
| Insurance Holdings | 0.05% | 0.12% | 0.11% | 0.11% | -0.07% |
| Other DII Holdings | 0.63% | 1.17% | 1.20% | 1.19% | -0.54% |
| Non-Institutional | 21.95% | 23.40% | 23.85% | 23.44% | -1.45% |
Foreign institutional investor (FII) holding witnessed a notable increase to 7.28% in December 2025 from 5.32% in September 2025, representing a sequential gain of 1.96 percentage points. This marks the continuation of a positive trend, with FII holding rising from 4.37% in December 2024 to current levels. The presence of 114 FIIs in the stock suggests broadening international interest, though the absolute level of FII holding remains modest compared to large-cap peers.
Mutual fund holding stood at 6.26% in December 2025, marginally up from 6.17% in the previous quarter but down from the 8.29% peak witnessed in December 2024. The participation of 11 mutual fund houses indicates reasonable domestic institutional interest, though the declining trend over the past year reflects concerns about the company's operational performance. The combined institutional holding of approximately 14.22% remains relatively low for a company of Thomas Cook (India)'s pedigree and market position.
Insurance company holdings declined to 0.05% in December 2025 from 0.12% in September 2025, whilst other domestic institutional investor (DII) holdings dropped to 0.63% from 1.17% over the same period. These reductions suggest some institutional investors are reducing exposure, possibly in response to the deteriorating quarterly performance and margin pressures. The non-institutional shareholding of 21.95% provides retail investor participation, though this has also declined from 23.40% in the previous quarter.
Stock Performance: Severe Underperformance Across Timeframes
Thomas Cook (India)'s stock performance has been dismal across most timeframes, with the share price declining 19.23% over the past year compared to a 6.44% gain in the Sensex, resulting in a negative alpha of -25.67 percentage points. The stock's current price of ₹115.95 represents a 38.47% decline from its 52-week high of ₹188.45 achieved earlier, whilst hovering just 1.49% above the 52-week low of ₹114.25.
| Period | Stock Return | Sensex Return | Alpha |
|---|---|---|---|
| 1 Week | -7.09% | +0.91% | -8.00% |
| 1 Month | -19.62% | -2.49% | -17.13% |
| 3 Months | -28.07% | -0.17% | -27.90% |
| 6 Months | -22.85% | +3.23% | -26.08% |
| Year-to-Date | -22.08% | -2.24% | -19.84% |
| 1 Year | -19.23% | +6.44% | -25.67% |
| 2 Years | -33.00% | +16.15% | -49.15% |
| 3 Years | +66.71% | +36.94% | +29.77% |
| 5 Years | +153.44% | +64.22% | +89.22% |
The short-term performance has been particularly brutal, with the stock declining 7.09% over the past week, 19.62% over the past month, and 28.07% over the past three months. This severe correction reflects investor disappointment with the Q3 FY26 results and growing concerns about the sustainability of the business model. The stock has underperformed the Tour, Travel Related Services sector by 10.44 percentage points over the past year, with the sector declining 8.79% compared to Thomas Cook (India)'s 19.23% fall.
From a technical perspective, the stock trades below all key moving averages, including the 5-day (₹121.96), 20-day (₹129.65), 50-day (₹138.18), 100-day (₹149.92), and 200-day (₹155.77) moving averages. This bearish technical setup, combined with the stock's classification as "Bearish" across multiple technical indicators including MACD, Bollinger Bands, and KST, suggests continued near-term pressure. The trend changed to "Bearish" on January 02, 2026, at ₹145.65, confirming the deteriorating price momentum.
On a positive note, the longer-term performance remains respectable, with the stock delivering 66.71% returns over three years and 153.44% over five years, significantly outperforming the Sensex. This suggests that patient long-term investors have been rewarded, though recent performance raises questions about whether this outperformance can continue. The stock's beta of 1.35 indicates high volatility, with price movements amplified relative to the broader market.
The risk-adjusted return analysis paints a concerning picture, with the stock delivering a negative risk-adjusted return of -0.44 over the past year despite volatility of 44.00%. This places Thomas Cook (India) in the "High Risk Low Return" category, an unattractive combination for investors. The negative Sharpe ratio indicates that investors are not being adequately compensated for the elevated risk they are assuming by holding the stock.
Investment Thesis: Mixed Signals Warrant Caution
The investment case for Thomas Cook (India) presents a complex picture with conflicting signals across key parameters. The company's proprietary Mojo Score of 37/100 places it firmly in "SELL" territory, down from a "HOLD" rating in November 2025. This deterioration reflects the confluence of weak quarterly results, bearish technical trends, and persistent operational challenges that overshadow the attractive valuation.
The company's quality assessment of "Average" reflects long-term financial performance that meets basic standards but lacks excellence. The 5-year sales CAGR of 23.04% and EBIT CAGR of 23.10% demonstrate reasonable growth, but the weak return ratios (average ROE of 6.09% and ROCE of 4.05%) indicate inefficient capital deployment. The company's status as a net cash entity with minimal debt provides financial flexibility, but this strength has not translated into superior operational performance.
The financial trend classification of "Flat" for Q3 FY26 accurately captures the stagnant operational performance. Key negative factors include the alarming statistic that non-operating income constituted 45.61% of profit before tax, highlighting unsustainable earnings quality. Additionally, the earnings per share of ₹0.89 for the quarter represents the lowest level in recent periods, reflecting the severe profit compression.
From a technical standpoint, the bearish trend that commenced on January 02, 2026, shows no signs of reversal. The stock's position below all major moving averages, combined with negative signals from MACD, RSI, Bollinger Bands, and KST indicators, suggests continued near-term weakness. The immediate support at ₹114.25 (52-week low) appears vulnerable, whilst resistance levels at ₹129.65 (20 DMA) and ₹149.92 (100 DMA) remain distant.
Key Strengths & Risk Factors
KEY STRENGTHS
- Attractive Valuation: P/E of 22.65x represents 43% discount to industry average of 40x, providing potential upside if operations stabilise
- Strong Balance Sheet: Net cash position with debt to equity of -0.28, providing financial flexibility for strategic initiatives
- Zero Promoter Pledging: Stable 63.83% promoter holding with no pledging indicates governance strength and promoter confidence
- Robust Operating Cash Flow: Generated ₹717 crores in operating cash flow during FY25, demonstrating underlying cash-generative capability
- Established Brand: Strong brand recognition in travel services with extensive distribution network across India
- Long-term Growth Track Record: 5-year sales CAGR of 23.04% demonstrates ability to capitalise on sector growth over extended periods
- Rising FII Interest: FII holding increased to 7.28% from 4.37% year-on-year, indicating growing international investor confidence
KEY CONCERNS
- Severe Profit Decline: Consolidated net profit collapsed 37.24% QoQ to ₹41.70 crores in Q3 FY26, raising sustainability concerns
- Margin Compression: PAT margin contracted to 2.09% from 3.40% in Q2 FY26, marking weakest profitability in recent quarters
- Weak Return Ratios: Average ROE of 6.09% and ROCE of 4.05% significantly lag industry peers and indicate capital inefficiency
- Non-Operating Income Dependency: Other income constitutes 45.61% of PBT, highlighting unsustainable earnings quality from core operations
- Bearish Technical Trend: Stock below all key moving averages with negative momentum across multiple technical indicators
- Severe Stock Underperformance: Down 19.23% over past year vs Sensex gain of 6.44%, with negative alpha of -25.67 percentage points
- High Volatility Profile: Beta of 1.35 with 44% volatility places stock in "High Risk Low Return" category with negative Sharpe ratio
Outlook: What Lies Ahead
POSITIVE CATALYSTS
- Margin Recovery: Any improvement in operating margins back towards 6%+ levels would significantly boost profitability
- Revenue Growth Acceleration: Reacceleration of top-line growth beyond current 4% YoY rate could restore investor confidence
- Cost Optimisation Success: Effective control of employee costs and operating expenses to improve operating leverage
- Market Share Gains: Successful competitive positioning to capture greater share of recovering travel demand
- Technical Reversal: Break above 20-day MA at ₹129.65 could trigger short-covering and momentum shift
RED FLAGS TO MONITOR
- Further Margin Erosion: PAT margins declining below 2% would signal severe structural challenges
- Sequential Revenue Decline: Any QoQ revenue contraction would indicate demand weakness and market share loss
- Institutional Selling: Continued reduction in FII or mutual fund holdings would reflect deteriorating confidence
- Break Below 52-Week Low: Decisive breach of ₹114.25 support could trigger accelerated selling pressure
- Rising Debt Levels: Any increase in leverage would erode key balance sheet strength advantage
The outlook for Thomas Cook (India) remains clouded by near-term operational challenges and deteriorating momentum. The company faces the critical task of stabilising margins whilst maintaining revenue growth in an increasingly competitive environment. The Q4 FY26 results will be crucial in determining whether Q3's weakness represents a temporary blip or the beginning of a more sustained downturn.
Management's ability to control costs, particularly employee expenses which surged 6.66% QoQ, will be critical to restoring profitability. The company must also address its heavy reliance on non-operating income, which currently props up overall profitability but raises questions about the sustainability and quality of earnings. Investors should monitor quarterly margin trends, revenue growth trajectory, and return ratio improvements as key indicators of operational turnaround.
From a technical perspective, the stock requires a decisive break above the 20-day moving average at ₹129.65 to signal any meaningful reversal of the current bearish trend. Until such time, the path of least resistance appears downward, with the 52-week low of ₹114.25 serving as critical support. Any breach of this level could trigger further selling pressure and test of psychological support at ₹100.
The Verdict: Operational Weakness Overshadows Valuation Appeal
Score: 37/100
For Fresh Investors: Avoid initiating positions at current levels. The 37.24% quarter-on-quarter profit decline, deteriorating margins, and bearish technical setup present significant near-term risks. Whilst the valuation appears attractive on traditional metrics, the operational challenges and weak return ratios suggest this may be a value trap rather than a genuine opportunity. Wait for clear evidence of margin stabilisation and earnings recovery before considering entry.
For Existing Holders: Consider reducing exposure or exiting positions, particularly if holding unrealised losses. The combination of weak quarterly results, flat financial trend, and bearish technical momentum suggests further downside risk. The stock's classification in the "High Risk Low Return" category with negative risk-adjusted returns makes it an unattractive hold. Only long-term investors with high risk tolerance and conviction in eventual turnaround should maintain positions, with strict stop-loss at ₹110 (below 52-week low).
Fair Value Estimate: ₹140-150 (21-29% upside potential, but contingent on operational improvement and margin recovery)
Key Risks: Further margin compression, revenue growth deceleration, intensifying competition, and technical breakdown below ₹114 support could trigger deeper correction towards ₹100 levels.
Note: ROCE = (EBIT - Other income)/(Capital Employed - Cash - Current Investments)
⚠️ Investment Disclaimer
This article is for educational and informational purposes only and should not be construed as financial advice. Investors should conduct their own due diligence, consider their risk tolerance and investment objectives, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results. The views expressed are based on data available as of February 05, 2026, and are subject to change.
