Thomas Cook (India) Limited is implementing a strategic demerger to unlock value from its diverse business portfolio. According to reports from The Financial Express, the company earned ₹428 crore of operating profit in FY26, with the foreign exchange business generating ₹149 crore EBIT from ₹326 crore revenue, achieving a 46% operating margin. The travel segment contributed ₹222 crore EBIT from ₹6,703 crore revenue, representing a 3.3% margin. The demerger aims to separate high-margin forex and travel operations from the hospitality business, eliminating the conglomerate discount that currently penalizes the higher-margin segments.
Sterling Holiday Resorts Limited operates as a debt-free resort operator with ₹340 crore cash as of March 2026. As reported by The Financial Express, the company manages 78 properties with 3,810 rooms across 65 destinations, achieving 59% occupancy in FY26. The business has maintained 25 consecutive profitable quarters and reported ₹129 crore EBIT with a 24.2% margin. In Q1FY27, the company demonstrated strong performance with occupancy jumping to 77%, room rates rising 10% to ₹7,809, and RevPAR increasing 20%. Revenue rose 21% to ₹170 crore and EBITDA rose 21% to over ₹62 crore with a 37% margin.
The remaining Thomas Cook India Limited will operate as three distinct businesses after the demerger. According to The Financial Express, the forex business generated ₹149 crore EBIT from ₹326 crore revenue with a 46% margin. The travel segment contributed ₹222 crore EBIT from ₹6,703 crore revenue with a 3.3% margin. The Digital Imaging business reported ₹11 crore EBIT from ₹836 crore revenue with a 1.3% margin. However, Q1FY27 showed challenges with Digiphoto revenue falling 38% to ₹131 crore and EBIT swinging from a ₹10.6 crore profit to a ₹15.2 crore loss. The company maintains ₹2,616 crore in cash and short-term investments, with ₹1,600 crore being prepaid forex float.
The demerger is expected to complete by Q1 FY28, with shareholders receiving 0.81 Sterling shares for every Thomas Cook share. As reported by The Financial Express, the company's market capitalization stands at ₹5,252 crore with ₹2,616 crore in total cash holdings and estimated unencumbered net cash of ₹771 crore. The sum-of-the-parts valuation estimates the demerged entities at ₹121-₹155 per share against the current ₹112 per share. A sum-of-the-parts approach suggests potential undervaluation of 8%-38%, with the company currently trading at a trailing P/E of 24x based on ₹219 crore profit.
The demerger addresses the heterogeneous nature of Thomas Cook's business segments, where capital-intensive hospitality operations compete with asset-light forex and travel services for the same capital resources. According to The Financial Express, the separation will allow each business to attract dedicated investors and analysts, potentially eliminating the current conglomerate discount that penalizes high-margin segments. The strategy follows successful demerger patterns in India, including Bajaj Auto's 2008 split and Triveni Engineering's 2011 demerger, though recent examples like Reliance's Jio Financial in 2023 have not always been successful. Success depends on Sterling improving occupancy and profits, forex sustaining growth, and Digiphoto recovering, which could unlock meaningful shareholder value.
