That this conference is being recorded. I now hand the conference over to Mr. Manoj Menon from ICICI Securities Limited. Thank you, and over to you, sir.
Hi, everyone. It's a wonderful good morning or good afternoon to you, depending on the part of the world you're joining this call from. Representing ICICI Securities, it's our pleasure once again to host the management team of Travel Food Services for the 2Q FY 2026 results conference call. Now over to Ms. Chhavi Agarwal from the management for introducing the management team and the further proceedings. Thank you, and good day.
Thank you. Good afternoon, everyone. This is Chhavi Agarwal, Investor Relations at Travel Food Services Limited. Welcome. Thank you for joining us on the Travel Food Services Limited earnings call for the second quarter and first half year ended September 30, 2025. I have with me Mr. Varun Kapur, Managing Director and CEO, Mr. Vikas Vinod Kapoor, Whole Time Director and CFO, to discuss the operational and financial performance for the second quarter and first half of the year and also address the question and answer session. We will be referring to the earnings presentation, press release, and financial result uploaded on the stock exchanges. Before we proceed, here is a disclaimer to the call. A few statements by the company's management in the call can be forward-looking in nature. We request you to refer to the disclaimer in the earnings presentation for further details.
We will now be starting the call, and I would like to hand over to Mr. Varun Kapur for opening remarks. Thank you.
Thanks, Chhavi. Good afternoon, ladies and gentlemen, and thank you for joining us for the second earnings call of TFS as a listed company. Before I take you through the key performance highlights for the quarter, which many of you would have observed in our earnings presentation and press release, I would like to discuss the broader industry dynamics and emerging trends. The Indian aviation market is currently the third largest in the world and is one of the fastest-growing aviation markets globally in terms of passenger traffic. Over the next decade, passenger traffic is expected to grow at a CAGR of 8%-9% in India. This sustained growth trajectory is driven by multiple structural factors on both the demand and supply sides.
This includes rising disposable incomes, expanding middle-class demographics, continued public and private investments in infrastructure development, and aircraft orders placed by domestic carriers. While the long-term industry growth drivers remain intact, passenger traffic during the first half of the current financial year was temporarily impacted by two major external events: the India-Pakistan conflict in May and reduced flight schedules that were implemented for maintenance and safety reasons following the unfortunate Air India airplane crash in June of this year.
Against this challenging backdrop, TFS has performed well and delivered a strong quarter with system-wide sales of INR 7.3 billion and PAT of INR 979 million, which equates to growth of 18.4% YoY in system-wide sales and 15.3% growth in consolidated PAT on a year-on-year basis as well on a comparable basis after adjusting for last year deconsolidation of the Semolina business. We achieved this by taking immediate and decisive action, managing the cost base tightly and driving efficiencies. Encouragingly, passenger traffic has shown signs of recovery in the past few weeks, and this recovery trend reaffirms the underlying strength of India's aviation sector and its strong demand fundamentals. TFS is now operating over 500 Travel QSR outlets and lounges at a system-wide level, thereby reinforcing our leadership position in the sector.
We mobilized 50 Travel QSR outlets and four lounges in the last 12 months. Our joint ventures are progressing well with timely mobilization of new units and steady progress on execution. Our brand portfolio as well has expanded to 135 brands as of September 25 at a system-wide level after the addition of 16 exciting new brands in the last one year. For example, in August, we launched India's first outlet of Gordon Ramsay Street Burger at Delhi Terminal 1 , which received a very positive response from travelers and great coverage on social media. We plan to bring more Gordon Ramsay outlets at other airports as well. At our Travel QSR outlets, we have undertaken multiple initiatives to drive spend, as well as enhancing the customer experience and driving higher throughput.
For example, we have launched a special quick commerce menu at select outlets, which brings a commitment to deliver your food order to you within a five-minute timeframe. Within our lounges, we introduced a range of marketing activities, including festival-specific menus, team celebrations, and specially curated events such as Master Class with MasterChef. These initiatives are designed to engage travelers and create memorable experiences for them during their travels and ultimately encourage repeat visits. Additionally, at our lounges we enabled a technology platform to provide direct integration to banks and card networks for a smooth lounge access for their customers through our wholly-owned subsidiary, Elite Assist Technology and Services. We have already entered strategic partnerships with multiple partners for this lounge access solution, and more collaborations are underway.
We also secured two new contracts: one to operate 11 Travel QSR outlets and one lounge at the domestic terminal of Cochin International Airport, which is the eighth busiest airport in India. With this, importantly, we will expand our presence to 14 of the top 15 airports in India. Second is the recently reopened Delhi IGI Airport Terminal 2, where we have started operating 14 Travel QSR units as well. As you can see, we have made very good progress across the business in the first half of the year. As we enter the seasonally strong second half of the year, we expect passenger traffic to continue recovering, supported by improved travel sentiment, normalization of operations, and sustained demand across both leisure and business segments. We expect our performance to benefit from increasing travel demand, as we have been seeing over the last few years.
We're also looking forward to commencing the Travel QSR and lounge operations in the recently won F&B concessions that I mentioned, as well as at the Noida and Navi Mumbai International Airports, which are expected to open soon. Now, I would request our CFO, Mr. Vikas Kapoor, to walk you through the financial performance of the TFS business.
Thank you, Varun, and once again, welcome everyone to the second quarter's earnings call. Before moving to the performance in detail, I would like to mention, as I had highlighted in the previous earnings call as well, Semolina Kitchens was part of our consolidated financials for the first half and part of Q3 in FY 2025, which subsequently, as per plan, was deconsolidated from October 14, 2024. Therefore, to have a like-for-like comparison and to ensure consistency in evaluating performance, Q2 FY 2025 and H1 FY 2025 numbers have been adjusted to exclude Semolina numbers, and the details for that have been shared in the presentation.
Going to the numbers, system-wide sales reached INR 7.28 billion in Q2, growing by 18.4% year-on-year, driven by both a strong like-for-like sales growth of 9.2% and a net contract gains of 9.3%, resulting from the mobilization of new units across airports for the second quarter. If we go to consolidated numbers, consolidated sales touched INR 3.5 billion, with like-for-like sales growth of 3.8% and net contract gains of 3.4% for Q2. I would like to mention that for PSS consolidated airports, passenger traffic declined by 3.5% year-on-year in the quarter. That said, our growth has been supported by focused efforts to drive business performance. We continue to stay focused on effective cost management, which has played an important role in driving profitability.
Additionally, as envisaged, the JV operations are now gaining momentum and profit from share of JV and associates also continues to see an increase. Our consolidated PAT increased to INR 979 million in Q2 FY 2026 from INR 849 million in Q2 FY 2025, registering strong 15.3% year-on-year growth on an adjusted basis compared to the previous year. The profit growth is driven by sales growth, cost efficiency, and uptake in JV profit on an adjusted basis. For the first half, system-wide sales growth was 22.4%, supported by like-for-like sales growth of 10.4% and net contract gains of 10%. Additionally, consolidated PAT has grown by 17.2% year-on-year in the first half on an adjusted basis. Our balance sheet is strong, with zero debt.
Cash balance has grown by INR 1.2 billion from INR 6.3 billion in March 2025 to end at INR 7.5 billion as on 30th September 2025. With that, I will close the opening remarks and then hand it back to the operator to open it for Q&A.
Thank you very much. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and then one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Again, to register for a question, please press star and then one. Our first question comes from the line of Aman Bbaheti from InCred Capital. Please go ahead.
Hi, thank you for the opportunity. My first question is on our gross margins. It has seen a significant jump in the first half of this year. What has led to the jump and is it sustainable ahead?
Aman, thanks for the question. This is Vikas here. I'll answer this. In terms of gross margin, our gross margin tends to be in the range of 80%-82%, which gets impacted by multiple factors like the product mix, the concepts that we are bringing to the consumer for the consumer experience, as well as various other initiatives that we do to drive revenue growth. In terms of that, what we have been doing over the last two quarters is managing our costs at an optimum level without compromising on the customer experience and at the same time ensuring that we bring new concepts which can enable our better revenue growth.
Okay. Sir, can you walk me through gross to EBITDA margin bridge? If I see, our gross margins have expanded to 88 basis points. But EBITDA margins are, you know, at 244 basis points. So, w hat all costs have gone up in this pass-through?
In terms of the walk-through between the gross margin to the EBITDA, quite a bit of the cost optimization has happened at various levels. In terms of us having a decent quarter, though impacted by the moderation in traffic, we have managed to control our employee costs as well as our finance costs from that perspective, and being way overall prudent in terms of the other expenses as well. This is with a clear focus in terms of ensuring that we have a continued momentum and a consistent approach in terms of driving profitability of the business from that perspective.
Is it fair to assume that our EBITDA margins would stay at these levels around 38%?
Our EBITDA margin will remain in a range-bound manner because as we bring in new concepts and mobilization of units and which is part of our industry, it typically takes us 12-18 months to bring the new mobilized units to the same level of efficiency as the rest of the business. You will see it being range bound. I won't say that, yes, we will let go of all the benefits that we have accrued, but at the same time it will be a range bound EBITDA margin. That's something that we have proven time and again by our consistent performance.
Okay. One last question on our traffic growth. We have seen like 4%-5% of growth in traffic, but we have grown more than that. Historically, what has been the trend? I mean, since you are in the businesses since 15, 16 years, what have you seen historically and what is the way forward for this trend?
Yeah. Yeah. Aman, Varun here. Yes, [audio distortion] so while it has been, I think what we were referring to earlier, this quarter particularly, I mean obviously since May, June it has been a bit of a challenging environment. You've seen that from various industry sources. I think airport operators, airlines all talking the same. Very evident, I mean, to all of us as travelers.
There has been undoubtedly a bit of weakness in travel. I think quarter two was where it was exacerbated in a sense. Traffic has actually kind of has been weak in the quarter. I think across our airports we actually saw, the ones we operate, a decline in traffic, you know, for this quarter. There was a 1% drop in traffic. In spite of that, at a system-wide level, obviously a combination of LFL, you know, that's been a strength of ours, which I think was seen even previously, and we've always spoken on that. In spite of a drop in traffic, we delivered LFL of about over 9%. We had net contract gains of 9.3%.
The combination of that delivered a system-wide growth of 18.4%, which I think, you know, it was a very resilient, very strong performance for us in spite of being a very, very challenging quarter. Obviously we are seeing trends come out. Historically, I think air travel, and nothing to do with us, I think just the Indian economy, the Indian story has been there over the last decade, obviously accelerating. You know, the right investments happening by private and public. The platform seems to be the best state. As you know, I mentioned when I was in my intro as well, 8%-9% CAGR expected over the next decade. Very few markets and no market of our size can even speak of those type of expectations in place.
I think we're at a great point in time and, we see every reason that, you know, our business seems a blip and already showing us that it was a temporary blip due to obviously, unforeseen two events that did occur, in the period.
I think that's it from my side. Thank you so much for answering.
Thanks. Thanks for your question.
Thank you. Our next question comes from the line of Nihal Mahesh Jham from HSBC. Please go ahead.
Yes. Good evening, Vikas and Varun. I had three questions. The first one was that for the LFL growth that you reported both on system- wide and for console, what will be the element of price hike?
Nihal, in the element of price hike, typically we tend to only pass on the inflation to the consumers from that perspective. Roughly it would be in the range for the first half of the year to be roughly around 2%-4%, that's it. Which would be the price hike which would have been passed on. As you noticed that inflation tends to come down over the years, over the months, which is there from that perspective.
Understood. I think you were referring to obviously a recent pickup in terms of trends of passenger traffic. For the current last few weeks, how has the trend been in terms of the pickup in passenger traffic?
Right. Nihal, hi, Varun here. We have surely seen, I think from the end of September, very visibly, I mean, there was also, there's public news around it. We've been seeing very clearly from the end of September a clear pickup across all airports, you know, in terms of passenger traffic, that whole recovery momentum coming back. I won't say back to where we're used to seeing it, but surely very evidently, I think week on week we're seeing an improving trend. Like I was mentioning, you're seeing airports, airlines all giving a similar commentary out there. I mean, visibly, I think anecdotally as well from probably a few months ago, especially in leisure markets, you'll see, you know, lines are getting longer, that's coming in.
Obviously with the second half normally for us as well is normally a stronger half of the year historically as well. It's a good time to see that momentum coming back as well.
Understood. Possibly to just get a sense in terms of quantitative element of what the trend is like. Is it like close to double digit now what it was, say, for the last three year CAGR?
Well, I think, you know, it's changing week on week because it's quite, we're pretty much in the early days. Probably the sense is that for the full year, you know, it was negative in the quarter. I think for the full year, one may probably see an expectation of probably mid-single digits for the full year. I think that's what you're hearing industry sources talk about. I think that's the trend. It's very difficult to say how, you know, because it is changing quite evidently, you know, what we saw from two, three weeks back to now. It's quite a moving target. Probably more helpful thing will be where probably the full year is kind of what the, you know, publicly we are seeing, you know, everyone expecting, you know, from the industry.
That's probably a more useful way, I would guess, to look at it.
Got it. One more question was that with the addition of the Cochin Airport, if you could just give a sense of the expected pipeline or what could be the expected count for both stores and lounges by the end of FY 2026, counting Noida as well as Navi Mumbai and Cochin and the addition of the Delhi units also that you've mentioned in the PPT?
Yeah, Navi Mumbai numbers we don't give you. Obviously, we spoke about, when I was talking, I mentioned about the size in terms of units of these opportunities. Maybe I could reiterate that as well. Cochin will be 11 units on the Travel QSR side and one lounge bar. That's, you know, we go live there, from January in a bit of phasing, but that's the plan there. Equally, we have Delhi Terminal 2 has already gone live for us. We're already operating there. You would have seen that airport has opened up. We operate 14 Travel QSR units in that airport. Noida and Navi Mumbai being new greenfield airports, we expect that opening to be in phases. It wouldn't be right for me to give probably an idea of how that would play out.
I think that once even the airport operators, once they see and they plan out that, probably we will be able to come and give you a specific. As you, as you publicly available, those airports are expected to open quite soon. And once I think we're able to share with you something more specific on those, we will. Yeah, we are ready. Units are in a good condition of opening, so all of that is quite in place in both of those airports.
Final clarification. For Navi Mumbai, you have 39 or 40 QSR outlets and one lounge. Is that the current pipeline?
Navi Mumbai is happening in phases. Like I said, you know, that is a bit with the airport operator working, so I wouldn't want to be the one commenting on that. That airport does happen in phases. Yes, we have both Travel QSR and lounges in that airport there. There'll be a bit of news obviously coming in once that is firmed up and public, you know. Probably we can come and discuss the exact nature of how those mobilizations and units are.
Understood. That's helpful. Thank you so much.
Thanks.
Thank you. Our next question comes from the line of Vatsal Dujari from Tata AIA Life Insurance. Please go ahead.
Hi. Hi, team. Thanks for the opportunity, and congratulations on a good set of results. My first question is on the new outlets you got on Delhi Terminal 2. They are on the concession model, but we also have a JV with GMR. Just was wondering how come those have come under the concession model for us?
Hi, Vatsal. Varun here. Delhi Terminal 2, as you do know, it was an airport operational earlier. It is currently reopened. Obviously, Delhi Terminal 3, there's some work happening. Some traffic has transitioned to T1. Delhi Terminal 2 currently, which is open, you know, in terms of the contract as well that we're doing there is a short-term contract. What we do operate, the joint venture with GMR, DHL, that does operate in other markets as well. This particular contract is a short-term contract, which we have for three years. You know, therefore, you know, the airport obviously comes up with contracts for particular needs. As you know, this airport has particular reasons it's opened up during the transition. For that, we are running this in that concession model as a result.
Okay. Okay, got it. My second question is on the gap between, on the LFL growth and the passenger traffic growth. We saw in this quarter the gap was almost close to 10%. Could you give us some kind of breakup in terms of how much is coming from an increase in, you know, penetration in terms of people spending more on F&B and lounges in an airport and also due to premiumization? And how do you see this trend going forward of LFL being higher than the traffic growth?
Vatsal, this is Vikas here. In terms of LFL growth, yes, while it was a weak quarter in terms of the passenger growth, our endeavor always is to work on two factors. One is that we continue to focus on improving penetration, upselling to the customers in terms of enhancing the customer experience by the change in brands and the new concepts that we bring, which allows us to up our overall average transaction value with them. A lot of initiatives goes in terms of that. Referring back to something which Varun also said in his speech, like the five-minute options that we have recently introduced, it's gained momentum in terms of that.
All these initiatives drive the customer penetration as well as the average transaction value at the airports that we operate in. That's been the trend. Going forward, as traffic recovers, these layers of initiatives and processes that we have as part of our DNA will be on top of the passenger growth.
Yeah. Yeah, to add to what Vikas said, Vatsal, you know, it's exactly we had a 1% degrowth you mentioned in traffic, and yet, LFL did grow at 9.2%. There was north of a 10% delta. Exactly, it's all those measures, and that's what I think, we're able to, as a market leader, completely focus on the sector. That's what we deliver. That's what we bring to the table, and that's what separates us from anyone else operating there. You know, actually driving that delta, even in a period where it is highly challenging, being able to deliver those numbers. You know, that's the focus of the business and our business model.
Got it. Just, Varun, a little more on the penetration aspect. Could you give us some kind of ballpark numbers as to say if 100 people walk into airports, how many of them actually consume your F&B like, you know, consume F&B at airports or, you know, use lounges at airports so that and how is that number, you know, benchmarked to the other geographies in the world?
Yeah. So Vatsal, yes, of course, penetration we do intend to drive and if you ask me as a finance guy, I would love to have a 100% penetration and let everybody buy some sort of an F&B. If you look at in terms of footprint, even in the larger airports we are not 100% present. What happens is it becomes very difficult to calculate how the penetration works across different parts of the airport and across multiple terminals as well. Like, just to give a case in point, Delhi is an 80 million+ pax passenger airport, and there are three large terminals, and we are not present in all the terminals as such, as well. In an ideal world, I would prefer that.
The only upside that we have is the customer can go to a lounge, and if he doesn't want to go to a lounge or he doesn't have a lounge access, he can still have food at our F&B unit. That does help us improve penetration or capture the customer from one angle or the other, and that's what has helped us. Overall, we do concentrate on improving penetration year-on-year.
Okay. Okay, got it. That was helpful. Thanks, Varun. That's it from my side.
Thank you. Our next question comes from the line of Purva Zanwar from B&K. Please go ahead.
Yeah. Hi, team. Congratulations on good set of numbers. My first question is regarding the difference between the LFL growth rate of console and system-wide FCC. There is a difference between the two. Is it primarily because the JV portfolio has expanded into newer airports over the last few years and it's still in the ramp-up phase, therefore giving better LFL? If so, as these JV assets measure, should we expect their LFL growth to converge with the consolidated LFL growth rate?
Hi Purva. Varun here. I think particularly on that, yes, I think like we had called out even last quarter and, you know, even earlier before that. Obviously the JVs have a lot of mobilization playing out. That plays out as well. You can see the net contract gains that played out in system-wide sales as well-being there. What particularly is there in console, that's one area, no doubt with the additional mobilization, you see the net contract gains being quite strong in those entities. In addition to that, I think in console we did have from that point of view, one of the airports which was Delhi, where we did see.
For example, you did see particularly, the traffic degrowth in our console versus system-wide, which was at 1%, console was actually about 3.5%. That was driven by Delhi. Delhi there was a degrowth in traffic, which was quite significant, almost 8%. You know, that's mentioned there publicly as well, you know, with some of the airport operators. This was due, I think, to a combination. Due to the crash, it was, you know, probably one of the more affected airports, because, you know, being an Air India hub. You know, coupled with that this quarter and probably also seeing that with this, there was a runway closure that happened, which I don't know if you're aware of, in Delhi, that affected flight schedules.
There was a pax movement happening with T1, where obviously we are there in T1, but that's a gradual mobilization that happens with those units because it's a new airport. You know, that is where our console numbers, particularly in the quarter two, saw a bit of hit because Delhi was, sits in that. Versus system-wide obviously has a lot of those other airports. I think that played out in that pax difference in Delhi did play out also in the LFL numbers that you see. That kind of explained the combination of the net contract and the difference in LFL is where that difference in sales growth that you're referring comes from.
You mean this consolidated LFL should gradually now improve from year one before they're impacted in future, related to specifically Delhi 1?
Exactly. We normally see LFLs converging, you know, there. Obviously, every market has its internal dynamics and that plays out. A passenger traffic could be more in one area, less in one area because of.
Mm-hmm.
Leisure markets and other drivers like that. Obviously those underlying effects stay the same. Those move slightly up and down. Yes, the underlying perspective of LFL converging and moving together generally tends to be very similar. You know, dynamics across all airports. Exactly that. Traffic was much weaker, therefore the LFLs were playing out weaker in that area. That was a key driver for that.
Okay. Second question would be regarding, what would be the major upcoming contract renewals apart from the Delhi one, in the future years, two, three years down the line? Any major one?
We have, like I said, we have the Delhi Terminal 3. We have a list of contracts which we've already called out as well in the DRHP. You know, that kind of lists out certain small contracts, big contracts that keep coming up for renewal. The one in this financial year is this financial year, right? This financial year, I think Delhi Terminal 3 contract does come up for renewal for us.
Okay. That's it from my side. Thank you.
Thank you.
Thank you. Our next question comes from the line of Param Vora from Trinetra Asset Managers. Please go ahead.
Hello. Thank you for taking my question. My question is regarding the revenue mix. Partner brands is around 54%, contribute 54% to our revenue, and in-house brands contribute around 45%. Can we expect a change in mix, like more focus on in-house brands?
Hi, Param . It's Varun here, and thanks for your question. In terms of our approach when we adopted to any sort of rollout of brands in the Travel QSR is we tend to work, as you see with most of our contracts, in terms of multi-outlet or a master concession way.
Right.
In that, at least our strategic approach has been that it has to be a combination of both in-house brands and third-party partner brands. Even within third-party partner brands, you have multiple difference. You know, you have international brand partners, you have international brands who are present in India, like your well-known QSRs. You'll have popular regional domestic partners. You'll have in-city based brands. Our approach always is a mix of those. For example, in an airport, you could have, say, in Chennai, you could have a KFC, you could have a Subway catering there. At the same time you'll have a Sangeetha or a Third Wave Coffee. You know.
Mm-hmm.
In terms of offering available, the way we look at it is there is not a strategy where, for example, maybe I can just give a operation how it works at KFC or what's an in-house brand. One would think in-house brands or you don't pay a royalty, costs are better, you know, we should get only in-house brands that drives more margin as a target. In reality, the way we look at it is by putting, say, an in-house brand, which could be, say, a Idli.com or a Curry Kitchen or a Dilli Streat, and also along with that you have a KFC, which caters to a particular customer, which also probably drives a particular level of revenue. We look at the entire basket.
We never look at how much does the individual store do, but what we look at by putting these multiple brands, what is the overall basket. Internally there'll never be a target to say, let's do more percentage of in-house or more percentage of third-party brands. It's always a let's do a basket that ultimately delivers the best IRR for us and ultimately that leads to the most sales, logically, you know, to drive. That's how our approach as a business tends to be. That's why you see it just so happens that the number is 54/46 or may change to 60/40. It's not a strategy of achieving a certain number. It's more driving what we believe will achieve the best financial outcome. That's how our approach is.
Okay. My follow-up question is regarding the new units, like, 15 new units are set up in QSR outlets and four new lounges this quarter. What is the expected payback period and margins for the new units compared to the existing one?
In terms of, be it a Travel QSR or lounge, this is Vikas here.
Yes.
Be it a Travel QSR or a lounge, our entire approach when we are approaching any tender and applying for any concession is looking at the overall ROCE, because that's what drives us in terms of our profitability and our target, including the focus on IRR. From that perspective, we are out of the view that whether it is a Travel QSR or a lounge, we should focus on one or the other from that perspective. Nonetheless, what we do try to do is that we get a certain payback in a set number of years in the early start of the contract. It typically takes us 12-18 months, A, to get those units mobilized and operating at the same level of efficiency as the rest of our business.
In some of the units which are in our existing airports, we do tend to turn it around faster from that perspective. We will be always focused on profitability rather than growth from that perspective. The focus will always be on getting the required IRR and ROCE back.
Okay. Understood. Thank you.
Thank you.
Thank you. Our next question comes from the line of Akhil Parekh from B&K Securities. Please go ahead.
Hi. Thanks for the opportunity. My first question is on the LFL growth side, right. What is a sustainable LFL growth rate one should look at, especially for the airports which are there, kind of matured with us basically over last two, three, four years basically. What's the sustainable LFL growth rate in those airports?
Hi, Akhil. Varun here. What I, you know, generally seen and it's difficult to put a number only because, you know, LFL, one of the key drivers there has been, you know, passenger traffic, right. I think the key way to look at it is we obviously do a delta over that. That's been our performance, and that's what we've been always, you know, doing. We deliver a delta over what the underlying passenger traffic is. That delta, I did talk about earlier, is that we are, you know, achieving that delta by a combination of, you know, initiatives, you know, in terms of obviously there's some part price and there's some part of sales initiatives, all that.
I think one should assume that there will be a combination of all of those initiatives that we will continuously be doing and always have a delta over it. Therefore it's impossible to give a LFL, unlike probably on the high street, you know, to say this is kind of the LFL target for us because obviously there's an underlying element that plays, on top of which you have inflation and then those initiative of ours. I think you should probably look at how that combination behaves and, over the long term, we've always seen that delta performance be there. Like I said, you know, this quarter as well, we did a 10% LFL growth.
A 9.2% LFL growth is a 10% delta to the -1% passenger traffic. I think that's been the nature of how our business has behaved.
Sure, sure. I got it. Second, Vikas, you mentioned about the penetration, right, across the airports. Do we maintain certain data points? Like for example, let's say, what are the number of bill cuts we are doing across our QSR at, say, XYZ airport and what is the footfall basically? What kind of conversion we are seeing and what is the scope of improvement over there?
Thanks Akhil for the question. Yes, to drive any business performance and the profitability that we have, you do those data insights, cuts in terms of NOBs, in terms of transactions, how many transactions happen on combos and stuff like that. Since they are commercially sensitive, I won't be able to share those at the moment because it's confidential at the moment.
Okay. The reason I was asking was, is there enough scope for the conversions to improve at the airports which we are operating? That was my that's the reason why I was asking this question.
In terms of, you know, in terms of the opportunity, you know, it is where, you know, there's no level where one can say, because ultimately it's about driving new experiences, right? That can be driven by new brands. You know, ultimately like, I think Vikas said it earlier, but generally that's the target we aspire to, right? You want every person going through the airport to have an offer available for them and to actually, whether it is Travel QSR and obviously our entry to lounges, right, you're capturing consumers in both areas. Person wants to go to lounge maybe today is feeling like, "No, the lounge is not right. Let me go to the cafe outside it." We want to capture the consumer there as well.
I think it's a question of having always some opportunity to keep pushing that. You want everyone going through the airport to do it. I think that only is not the driver, the way we look at it. Yes, we have passenger traffic. You would also do, you know, additional units that capture consumers, keep changing units to capture consumers. In addition to that, you know, you do promotions, you do activities. Like I mentioned about the five minutes of free, you know, something like that, gets more people in. You keep doing something different just to keep consumers engaged, right? People like choice, people like variety, people like trying. We do different stuff. We got, for example, Gordon Ramsay down as a concept there, you know. That gets more people to come and try.
You know, someone may have said that, "Listen, I'm flying out in the night. I won't have a meal. I've come a little early to the airport." You know, some things like that we're doing. You know, those type of things drive more and more people. I think I would say that while, you know, obviously when Vikas was mentioning we do a lot of analysis on our end, which obviously is commercially sensitive, but yes, the target is to keep working on ideas, to keep increasing, you know, the consumers we're targeting and driving that delta with growth.
Last question on the guidance.
Sorry, Akhil sir. Sorry to interrupt. May we request you to return to the queue for follow-up questions?
Okay. Yes.
Thank you so much. Our next question comes from the line of Dhiraj Mistry from ICICI Securities. Please go ahead.
Hi. I was having particular question about the price hike, what you mentioned, that usually you take a price hike in a range of around food inflation. Historically, have you done some study where that the if you increase the affordability of the product, you see that there is exponential growth in your footfall, or let's say revenue drivers, rather from pricing action it would be more driven from the volume growth, which you would witness?
Dhiraj, this is Vikas here. Of course, when we do pass on any pricing increase to pass on the food inflation to the customer, we look at it in terms of customer experience, what value we can continue to give to the customer from that perspective. That is definitely the underlying business view on that. Over and above that, what happens is we do studies around price elasticity, how it will impact the numbers in terms of penetration, in terms of the uptake of a new concept and various other area, and it's a ongoing exercise. It's not something that we do it only when we are doing a price hike because the profile of the customer in an airport also keeps on changing. That's one parameter to be kept in mind.
At the same time, if you look at the sheer range that we operate in the airport space, right from the lounges to the bars to the casual dining to the QSR to the cafes, we also now operate Udaan Yatri Cafe. If you look at it from a price range point of view, we are covering from the guy who would be keen on having a coffee or a tea at a Udaan Yatri, right up to a guy who is a first class customer and wants to have a lounge access. That's something that we cater to from that perspective. Yes, it's part of our DNA, and we do it consistently.
Got it. Got it. We have seen material improvement in our EBITDA margin. Would you like to quantify what would be the, or let's say, guidance in terms of near-term perspective, where our EBITDA margin would lie on an annualized basis? I completely understand there would be some seasonality factor on quarter-on-quarter basis. On an annualized basis, can we, can you give some guidance for your EBITDA margin?
EBITDA margin, of course, gets driven by, as I said, product mix, new concepts that we bring in and how the new units are getting mobilized. Because like I said earlier also, it's a combination of factors. Some of the new units could take 12 months to come to the same level of efficiency and some units might take 18 months. It depends on where, how from that perspective. In an ideal scenario, yes, I believe that EBITDA margin should, over a period of time, improve as we bring in better efficiencies and the new airports stabilize from that perspective. What drives us is predominantly our PAT because that's our focus area in terms of the overall bottom line after the taxes and everything.
Got it. Very quick question on seasonality factor. Based on your historical study, what would be the contribution of second half versus first half? In fact it would be much better if you can give quarter on quarter, let's say Q3, Q4 and Q1, Q2. What would be the seasonality factor to the overall annualized revenue?
Yes, historically, we've been seeing, I think probably the way to look at it is in our minds, always at 45, 55 kind of level. Second half is obviously stronger of the year. You know, you have December, January period playing out on that, and we tend to see it. This has the monsoons plus a bit of weaker trading, tends to normally be there in passenger travel as well. Our first half always is 45, second half kind of 55. Obviously, this year has been a bit exaggerated with the whole passenger traffic in Q2, but normally a 45, 55 is what we historically always consider internally.
Yeah.
We're guiding against, yeah.
Okay. One last question from my end. Can you throw some light on your new subsidiary, Elite Assist Technology, in which airport you would be operating and what kind of, let's say, economics we can see in that subsidiary?
Yeah, sure. Elite Assist Technology Services and maybe the acronym is what would be more interesting to talk about, it's EATS, you know, very relevant for our business. You know that EATS is actually rolling out technology solutions for our various business lines. The first initiative is the lounge access management solution, which we've done, which is actually we've enabled a technology platform which gives direct integration for banks and card networks for lounge access to their customers. You know, that's generally what that business does for us and focus on currently.
Okay. Would you like to, where it would operate and, any quantification you would like to give or let's say revenue or as well as PAT in terms of?
It's too preliminary to give any quantification, but where it does operate, it supports our lounge business. You know this is something we started rolling out from the quarter in terms of supporting the lounge business for direct integration, you know, with bank and card networks. That's where the business would operate. You know that's over the next few quarters we could be probably giving a bit more color as that rolls out.
Okay.
That's the way we see this particular area you see across our lounges currently. That's the focus area for it to work.
It will operate in our JV lounges also or it would be 100% our lounges where you operate?
This would generally support the lounge business across because it would do tie-ups and support the lounge business across. It may be different in different lounges in different manners, but it would possibly, you know, be sort of the solution we are developing. It may be, for example, the initial pieces could be more aggressively in our lounges wider, but it would work with other lounges as well. You know, that's a solution when you develop, it can provide, you know, and that's where our capability can play out. We can support other lounges as well. Again, obviously, as, like I mentioned, it's a recent rollout focused on our current lounges, you know, to get it started.
Got it. Got it. Thank you very much. I will fall back in the queue.
Thank you.
Thank you. Our next question comes from the line of Anuj Kashyap from A3 Capital. Please go ahead.
Hello, I'm audible?
Yes sir, you're audible.
Yeah.
Please go ahead.
Thanks. Congratulations team. I just wanted to know what is the strategy regarding the like our name is Travel Food Services. Beyond airports, I would like to know the strategies like railways or highways, because India is roaming these days a lot. What are the strategies that I in regard to it?
Sure, Anuj. Thanks for the question. So obviously, yes, we've been predominantly, largest piece has been at airports. But you know, we did, you know, during even our listing process in terms of our DRHP, and we've mentioned as well in during the period in the previous quarter as well. A focus for us would also be two additional areas beyond our traditional business in terms of the airports in India. We are also looking at expanding, A, the airport business internationally with a focus on lounges as well as highways, you know, across India. That's our immediate focus. Railways maybe not right now, but highways we do see as an opportunity currently for our business.
You know, with the whole expansion the government is doing around investing in highways, you know, planning these expressways, which are, you know, areas which are captive, you know, where, you know, going from one area to the other. These are access controlled locations. We see these and WSAs, they call them, wayside amenities on those. We do see that as an opportunity. The government has typically called over 1,000 wayside amenities over the next few years, which will be access controlled SMB areas. We see that playing to our strength, where we can actually go in multi-brand, build out fuel, non-fuel retail, play that opportunity. We do see that area to build up F&B hubs in those areas as an opportunity for us, no doubt. I think, you know, you said the right thing, and we see again.
Let me, if I may stress that I think we do see it is a highway opportunity, a bit more of a long-term because it's just starting, it's nascent. We won't compromise our return metrics, so we'd go in that carefully. We take the right opportunities, we get the model right. Yes, we do believe we have the strengths to make that work. I think with that, and I think very few others do have their own brand mix, experience of operating these areas, financial ability to invest, all that coupled together, robust central team to support it. We will do it in a manner without compromising our return metrics. That will be our approach to the business.
Yes, sir. Some just one add on to it, sir. Like, sir, like you said, as a team, as a company, you analyze the customer data. Do we have, like, loyalty programs and also the, like, special discounts for the frequent customers? Like, many people are traveling day in, day out these days from like, you know, on busy routes like Delhi, Mumbai, Bangalore. Do we have loyalty programs also for the customers?
Yes. Two areas. One, yes, you know, part of I think the previous thing I mentioned, you know, around EATS is also building a bit of that because, you know, by having a technology solution in place, it does allow that to be much smoother. That is part of the plan there as well. In addition to that, you know, what we do is we have various packages available for various traveler groups, you know, that we believe will actually, you know, A, the, you know, it's what we believe will drive, you know, customer spending. This is also the right thing for those groups. For example, I'll give you one example. We have lounge packages we do, which are discounted or special for senior citizens. We have a student package.
We even have a family package. You know, if you have young kids going to a lounge and everyone may be traveling business class or they don't have a card. You know, there's a way we actually allow them at a discounted as a family package. Those type of things we do, and that's how we kind of address kind of different customer cohorts. Yes, there's a deeper strategy we're working on as well. That's part of our business. You know, we constantly work on areas. It's a good point, you know, to drive loyalty, people who fly regularly, which is more and more happening, right? People are more and more in the air, more regular. I think it's becoming, you know, very much in nature in our country now.
Yes, sir. Yes.
Once a year is no longer what, you know, once a year flight people are trying, traveling maybe more than once a month as well these days.
Yes, sir. Thank you, sir. Best of luck for the future.
Thank you, Anuj. Thanks for your question.
Thank you. Our next question comes from the line of [Nikhil Oswal] from Oswal Investments. Please go ahead.
Hello, sir. Congratulations on good set of number, and thanks for the opportunity. Sir, my question is on the number of QSRs you have around five QSRs and lounges. Out of these, how many would be coming under the Adani umbrella? Hello?
Yeah. Just one sec . Your question was you wanted to know how many of our Travel QSR units are in.
How many of our Travel QSR and lounges come under airports operated by the Adani Group?
Okay. Got it. Roughly it will be slightly over 100. I think it'll be closer to the roughly around the 120 mark is what there. I don't have the exact number handy with me right now, but it's roughly around that. I know it's about 120 mark roughly.
Okay. Okay, sir. Sir, one question which comes up in mind is like, see, we all know what happened to DreamFolks. How do we protect ourselves against the risk that, I mean, if there is a risk at all, that tomorrow Adani says that, "Okay, you know, under my airports, I want to, you know, operate the QSRs." How do we protect against such a risk?
In a way, two parts to that question. One, I wouldn't want to, you know, particularly comment on DreamFolks because that's a very different model, right? We are actually a brick-and-mortar operator. One's just, you know, a tech, you know, aggregator in between. I won't want to comment on that because, you know, different thing. Our model obviously is we actually invest, build and run those units. The slight difference, you know, probably to that as well is, you know, many of these units we do run through joint ventures. You know, we already are in a joint venture with Adani Airports. By doing that, you know, our skill set in terms of operators, lot of their learning, their expertise as airport operators, you know, they run multiple airports, very strong teams there.
You know, that skill set coming together is what creates, you know, that's why you see many of the airports, you know, truly have, you know, really top concepts. Those outlets run really well. You know, there's great feedback on those. You know, that mix of airport operator and, you know, F&B operator or lounge operator works very well, and especially priority private airports that plays out. That's how that model works. You know, it's already in a joint venture, so you know, they are already part of the business with us in these units that I mentioned to you.
Okay. They already have a share of the pie, so they won't be inclined to, you know, I mean, take those fully that way. Okay.
I mean, they partner with us, and these units, you know, are given through a process as well, right? These are long-term contracts given there. For the process and ultimately these, at least in our case, these units are in a joint venture with them. We operate it together.
Okay. Okay. Your sense is we are fairly insulated from.
[Nikhil] sir, may we request you to take the queue? Thank you. Our next question comes from the line of Vatsal Dujari from Tata AIA Life Insurance. Please go ahead.
Thanks. Thanks for the follow-up. Just had a couple of some questions. Is it possible for us to give a breakup of the LFL growth into what was the LFL growth and the lounges part and the Travel QSR part?
Vatsal, the like-for-like in both lounges and Travel QSR because it's in most of the airports that we operate, they are in the same airport. They are in the similar range from that perspective. Of course, there is the passenger traffic is one element, but in the cases of lounges, since we have tie-ups even with airlines and everything. In terms of the overall mix, that seems to be a bit more consistent from the Travel QSR perspective. Otherwise, both are in the same range of LFL, for us.
Got it. Just one more thing. How do we think about capacity utilization in our outlets and our lounges? Like some of the more mature lounges, like Mumbai or say Kolkata and Chennai, what kind of capacity utilization are they operating at? Even on the Travel QSR side, some of the more mature airports and outlets, what kind of capacities are they operating at?
Yeah. No, right, Vatsal, that's a great question. Maybe to give a perspective, you know, we're. Maybe I can relate it to a high street, you know, if you look at a high street operator and ask, you know. Generally for high street, your capacity tends to be driven by your lunch and dinner, right? People go, you have a lunch and dinner, two, three-hour window. Once your sales is set there, it's very difficult for one to fill more because, you know, that period is set. That's a two, three-hour window. A consumer is not gonna have lunch at, for that matter, 7:00 A.M. or, you know, breakfast not really worked in India. You know, not gonna have come for dinner at 5:00 P.M. or for that matter, past midnight.
What works a bit different in airports is ultimately your, you're tied to the flight you're taking. When an airport has got an X% traffic, and normally the capacity normally really gets into play as traffic increases, which is India's bout, right? We're the one fastest growing travel economy in large scale, anyway. As that grows, what tends to happen, the airport situation, which is why you've seen our growth rates be quite consistent over, you know, decade, you know, it has been the business has performed like that, is because what has happened is that every time new capacity or new airline or new flight is there and more passengers come, they come in an incremental hour. For example, if three hours are full, the, it's the peak, the next will become the fourth hour, then the fifth hour.
Your Travel QSR or lounge, while at that moment may look busy during peak, but for more consumers to come, they actually the additional airline is in the off-peak hour. Our capacity is unused at that point in time. That's why you see those units in airports actually have a long runway of growth, even just with the same investment assets. Don't know if I was able to explain that right. You know, for example, if you have a flight from 7:00 P.M.-10:00 P.M. is 7:00 A.M., 10:00 A.M. is your peak period. The next flights come in 10:00, 11:00. That's not peak. There's enough capacity at the Travel QSR and lounges to absorb that consumer, and that's how it tends to work.
That's when therefore the right set of outlets, the right set of space is planned in airports considering what is there during in terms of number of flights, how many they can absorb. It actually works quite well. We just obviously need to strengthen the teams during those hours, right, in terms of number of people, which is not that difficult and not that incremental cost, you know, not much fixed cost goes in. That's how our model works. Very different than the high street.
Got it. Very, very helpful. Thanks. Thanks a lot. That's it.
Thank you. Ladies and gentlemen, we will take that as the last question for today. I will now hand the conference over to the management for closing comments.
Yes, no, thank you very much to the ICICI Securities team for hosting us. We appreciate all of you taking the time today to join us for the earnings call post our Q2 results. If you have any other queries, please feel free to reach out to our investor relations team. Thank you, everyone.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.