Ladies and gentlemen, good day and welcome to the Travel Food Services Q4 FY 2026 earnings conference call hosted by ICICI Securities. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manoj Menon from ICICI Securities. Thank you, and over to you, sir.
A wonderful good afternoon to everyone. Representing ICICI Securities, it is our absolute pleasure to host the management of Travel Food Services Limited once again for the results call. This time it is for QFY 2026. Without much ado, over to Chhavi from the management for the detailed introduction of the management team and beyond the call. Thank you.
Thank you, Manoj, and good afternoon, everyone. This is Chhavi Agarwal, Investor Relations at Travel Food Services Limited. Welcome, and thank you for joining us on the Travel Food Services Limited earnings conference call for the fourth quarter and full year ended March 31st, 2026. I have with me Mr. Varun Kapur, Managing Director and CEO, Mr. Vikas Vinod Kapoor, Whole Time Director and CFO of TFS, to discuss the operational and financial performance for the fourth quarter and for the full year and address the question and answer session. We will be referring to the earnings presentation, press release, and the financial results uploaded on the stock exchanges. Before we proceed, here is a disclaimer to the call. A few statements by the company management in the call can be forward-looking in nature, and we request you to refer to the disclaimer in earnings presentation for further details.
We now will be starting the call. I would like to hand over to Mr Varun Kapur for opening remarks. Thank you.
Thank you, Chhavi, and thank you, Manoj, for the introduction. Good afternoon, ladies and gentlemen, and thank you for joining us for today's earnings call. We hope you had the opportunity to go through our Q4 and full-year results and the presentation that was released yesterday. FY 2026 has been a defining year for us, not only as our first full year as a listed company but at the same time being one that has been marked by multiple disruptions ranging from war-like events to airline-related challenges, which tested the resilience and adaptability of our business in a dynamic operating environment. As I talk about the fourth quarter and the full year, I would frame our performance across three dimensions. First, the evolving industry backdrop, second, our operating performance, and third, how we are positioning the business to capture the next phase of growth.
Let me begin with the industry environment for the quarter and the year. Passenger traffic in the fourth quarter saw a continuation of trends observed through the year, a sector that remains structurally strong but with some near-term volatility. The quarter opened with encouraging momentum supported by seasonally strong travel demand. However, growth moderated following the escalation of the Middle East conflict in early March, which weighed on international travel sentiments and impacted Gulf-bound routes and NRI travel. As a result, passenger traffic across our network airports was broadly flat year-over-year during this quarter. It is apparent to all that the Indian aviation sector has faced multiple challenges during the financial year. It started with the India-Pakistan geopolitical conflict in May 2025, which caused temporary air traffic disruptions at the outset of the financial year.
The second quarter was then impacted by reduced flight schedules due to maintenance and safety reasons following the unfortunate aircraft crash in June of last year. In December 2025, airline-related operational disruptions arising from the implementation of FDTL crew rest regulations temporarily curtailed the capacity at India's largest carrier. In the last quarter, traffic growth was impacted, as we all saw, by the ongoing Middle East conflict. Due to these reasons, passenger traffic at TFS-managed airports saw muted growth of 1.2% year-on-year for the full year FY 2026. That said, we observed that passenger volumes recovered quickly following each disruption, reinforcing our view that underlying demand remains strong. Structural drivers, which include low penetration of air travel, rising disposable incomes, expansion of airport infrastructure, and increasing propensity for travel continue to support long-term growth in the sector.
During the periods of disruption that I spoke about earlier, we were able to maintain operational continuity supported by our agility and disciplined execution. This same operational resilience continued during the conflict situation in the last quarter. We reduced our reliance on gas wherever applicable. Menus were re-engineered to prioritize centrally supplied items, reduce on-site cooking load, and raw material stocking was monitored closely to avoid stockout situations. Our centralized operating model, strong supply chain capabilities, and scalable platform have enabled us to respond effectively to such situations at airports. Moving to our performance. Despite these sectoral headwinds, TFS has delivered a strong and resilient performance for the full year. A key highlight of the year has been the continued expansion of our system-wide footprint. We have strengthened our presence across airports, growing our network to now 20 of them.
We have opened outlets at the newly entered airports like Cochin and Navi Mumbai, as well as further strengthened our position in existing key airport hubs. During the year, we operationalized new outlets across Terminal one and two of Delhi Airport, which meaningfully enhances our presence across all terminals at one of India's most strategic aviation hubs. In terms of network, our system-wide presence now exceeds 550 travel QSR outlets and lounges. This expansion has been driven by the successful mobilization of 76 travel QSR units in FY 2026 across airports including Delhi, Mumbai, Ahmedabad, Cochin, Navi Mumbai. On the lounge front, we've opened a lounge in Cochin, and we opened a new lounge, Kyra Lounge, at the Hong Kong International Airport in partnership with SSP and Airport Dimensions.
This marks an important milestone in our international lounge journey and it highlights our ability to deliver premium lounge experiences in international environments. Alongside network expansion, we have continuously focused on premiumization and curation of offerings to enhance the passenger experience. Our brand portfolio has expanded meaningfully and now spans over 145 brands with a wide mix of global, regional, and in-house brands. During the year, we added several well-recognized international brand partnerships such as Gordon Ramsay, Nando's, and Wagamama, which have further strengthened our premium positioning across key airports. At the same time, our in-house brands like Idli.com, Cafeccino, and Dilli Streat, to name a few, and regional brand partners like Sri Krishna Sweets and Bikanervala continue to play an important role in driving localization and relevance across different geographies. A key area of focus for us has been creating differentiated food and beverage experiences for passengers.
This includes introducing regionally inspired menus, premium dining formats, and experiential offerings across both travel QSR and lounges. At our travel QSR outlets, we introduced specialized breakfast regional menus, innovative beverages such as signature filter coffee and boba tea, value-led combo offers to cater to evolving customer preferences. Within lounges, we've enhanced customer engagement through seasonal activations and thematic offerings, including festival-led menus and experiential formats. These helped drive higher dwell times and increase the frequency of visits. During the year, initiatives such as culinary masterclass with master chefs and food festivals like Swad-E-Watan have seen strong customer engagement and satisfaction. We continue to make steady progress on upcoming opportunities. With Noida Airport on track for commencement of operations in the coming months, this continues to strengthen our committed pipeline and visibility for further growth.
On the technology front, we continue to make steady progress in our journey towards becoming a tech-enabled travel hospitality company. FY 2026 has been a landmark year in this regard with the launch of our EAT platform enabling direct bank to lounge access as an integrated service. The platform has been stabilizing well, and we are encouraged by the response. Our EAT platform remains a key enabler, enhancing customer access, improving convenience, and supporting our ability to drive higher engagement and monetization. As we look ahead, we are also working on the addition of ancillary services on the platform to further deepen customer engagement and unlock incremental revenue opportunities. Our financial performance also reflects our strong and disciplined execution. For the fourth quarter, our system-wide sales grew by 25.4% year-on-year, and consolidated PAT grew by 15.1% year-on-year.
Similarly, for the full year, system-wide sales grew strongly by 25.4% year-on-year to INR 32 billion, and adjusted consolidated PAT grew by 21.5% year-on-year to INR 4.5 billion. This was achieved against the backdrop of a year that saw just about 1% passenger traffic growth across airports, therefore clearly showcasing the strength of our commercial model. I would also like to highlight the importance of our people. We have continued to invest in building a strong organizational culture focused on performance, collaboration, and customer excellence. We have been recognized as the most admired retailer of the year 2025 for employee practices at the MAPIC Awards, and have been certified as a great place to work for the second consecutive year. These achievements showcase the strength of our people practices and a continued commitment to building a high-performance organization.
Looking ahead, the near-term macro environment is likely to remain dynamic, driven by external factors such as geopolitical developments, airline capacity changes, and input cost pressures, which can impact passenger traffic. We are closely monitoring these developments and have the action plans and clearly the experience to execute efficiently to navigate the evolving landscape effectively. At the same time, I remain very confident in the long-term growth trajectory of the Indian aviation industry, and our focus will be on capturing the opportunity as we navigate any short-term disruptions. We will continue the mobilization of our committed pipeline across new airports and terminals. Further, based on our initial success in Malaysia and Hong Kong, we are actively working towards expanding our international footprint through new lounge opportunities as well.
The company is also exploring wayside amenity opportunities and access-controlled expressways, a segment backed by strong government intent and investment plans in the medium term. With that, I would like to thank all our stakeholders for their continued support. I will now hand over the call to our CFO, Vikas Vinod Kapoor, who will walk you through our financial performance in more detail.
Thank you, Varun, and good afternoon, everyone. I will now discuss in detail the financial performance for the fourth quarter and the full year. For the fourth quarter, system-wide sales reached INR 9 billion, registering a growth of 27.7% year-on-year. This growth has been supported by like-for-like growth of 6.1% year-on-year. Net contract gains of 17.3% year-on-year in the quarter. Like-for-like growth reflects the continued impact of our focus initiatives around menu engineering, premiumization, and customer-led innovation, which has helped drive higher throughput and sales. Net contract gains is driven by mobilization of new units across key airports. At a consolidated level also, revenue grew to INR 4.6 billion, up 25.7% year-on-year, driven by like-for-like growth of 9.4% and net contract gains of 21.3%. Gross profit margin increased to 87.3% compared to 83% in the same period last year.
This improvement was led by strong sales growth, higher contribution from value-led combos, and procurement efficiencies. There was a one-time reclassification of INR 78 million cost of services from cost of goods sold to other expenses. Adjusting for that impact, gross profit for Q4 would have been 85.6%. Other expenses increased to 33.6% of sales, primarily on account of lounge aggregation business-related service costs now being shown in this line item. Moving to operating profit for the quarter, EBITDA increased by 38.3%, benefiting from lower manpower cost and flow-through of higher gross profit. If you look at the bridge from EBITDA to PAT for the quarter, the following factors need to be considered. A one-time provision has been created for litigation-related matters on a prudent and a conservative basis, though we believe our position on these matters remains strong.
Share of profit from JV and associates declined year-on-year, primarily due to a higher base in one of the JVs where there was a higher deferred tax reversal in Q4 of last year, which we had also highlighted in our Q1 FY 2026 call. Hence overall, PAT grew to INR 1.2 billion, registering a growth of around 15% year-on-year. Moving to full year performance, FY 2026 has been a strong year of growth and execution, despite being characterized as a year with passenger disruption. Before I go into the detailed numbers, I would like to briefly touch upon the accounting treatment relating to our JV entity, Semolina Kitchens. This entity was consolidated in our financials until October 14, 2024, and was subsequently deconsolidated. Accordingly, to ensure a like-for-like comparison and consistency in performance evaluation, FY 2025 numbers have been adjusted to exclude the impact of Semolina Kitchens.
The details of these adjustments are provided in the investor presentation. System-wide sales for FY 2026 reached INR 32.1 billion, registering a 25.4% year-on-year increase. Like-for-like sales growth stood at 9.4%, supported by strong execution across markets, while net contract gains were 13.5%, driven by network expansion across key airports. At a consolidated level, revenue from operations grew to INR 16.5 billion, representing a 13.9% year-on-year growth on an adjusted basis, driven by a like-for-like sales growth of 6.3% and net contract gains of 8.8%. In terms of revenue mix, our business continues to remain well-balanced across both travel QSR and lounges. This balanced growth shows the strength of our integrated platform, with travel QSR benefiting from throughput and menu-led initiatives and lounges benefiting from premiumization and higher dwell times at airports.
Travel QSR forms nearly 55% of the consolidated revenues and lounges form 41%, with 4% being contributed by management and other services. In terms of profitability, we have seen margin expansion supported by operating leverage, scale efficiencies, and disciplined cost management. For full year, gross margins improved to 84.7 compared to 81.7 last year. Employee costs remained well controlled, reflecting productivity gains and operating leverage from scale-up across locations. Consequently, EBITDA was INR 6.5 billion in FY 2026, an increase of 21.3% year-on-year. Profit after tax for FY 2026 was INR 4.5 billion, reflecting a strong growth of 21.4% year-on-year, driven by revenue growth, margin expansion, disciplined cost management, and higher contribution from joint ventures due to faster mobilization of units in the JV.
As of March 26, trade receivables are higher by around INR 1 billion due to the initial ramp-up of our Eats business, which we are seeing to normalize by end of H1 of current year. Our balance sheet continues to remain strong. We remain a zero-debt company with a healthy cash and investment position of approximately INR 8.4 billion as of March 31, 2026, providing us with significant financial flexibility to invest in growth opportunities and support long-term value creation. Overall, FY 2026 was a year of strong growth, margin expansion, and disciplined execution despite multiple short-lived disruptions, highlighting the resilience of our business model. Company is happy to announce our annual dividend of INR 10.25 per share for FY 2026, subject to shareholder approval.
Looking ahead, as Varun mentioned, while the near-term environment may remain dynamic, we remain confident in the structural growth drivers of the aviation sector, as has been proven time and again, and in our ability to continue executing on our growth pipeline. We remain focused on maintaining this momentum through continued scale-up, operational efficiency, and prudent financial management. With that, I will hand it back to the operator for Q&A session. Thank you very much.
Thank you. 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 touch-tone phone. If you wish to remove yourself from the question queue, you may press star and then 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. Our first question comes from the line of Anchal Kumar with HDFC. Please go ahead.
Yeah. Thanks for the opportunity. My first question, I just want to understand, how do you see the first quarter, and especially given the fact that the last year first quarter was impacted by India-Pakistan? We are already in May, end of May. What kind of indication are you getting or you can share in terms of trading in the first quarter, please?
Hi, Varun here. Thanks for the question. In terms of where we're seeing it, maybe given a little, I can maybe talk a bit back and give a sense of how it's looking right now. Where we saw the year start off, and I think the calendar year, which is our last quarter of the financial year, January actually was quite strong, as one would have seen anecdotally at airports, and even in our numbers, we were seeing that. February, I would say, started off a bit strong, but I think was generally because of the last few days showed a muted growth. I think obviously the war effects kicked off in March. We saw March dip come, largely fueled by a drop in international traffic. That continued to April. April probably was actually slightly worse than March, probably similar to, as you said for May.
April was a strong year last year. We saw year-on-year across airports, a bit of a depressed growth. May, we're early. I think we're in the month of May, early to get the traffic data out, because that comes a bit later. The signs are May is showing improving trends in passenger traffic. Obviously from a base of last year, it's showing much better, I think even just from a trend versus what we saw in March and April, there seems to be a clear improvement in trends playing out in May.
Right. In terms of full year FY 2027, what sort of inorganic growth you think you could achieve, and do you see any risk from the political changes in West Bengal in case the Kolkata Airport goes to Adani? What kind of risk do you see from that?
I can maybe talk in two parts. The first part, I think for this financial year, see while we don't particularly talk on the numbers, but I think what will be relevant for you to look at is normally the most important indicator for us, as it has been, I think been quite clear for one looking at the stock would be passenger traffic, right. Obviously, our commercial model success is the fact that in spite of traffic being weak, we delivered delta in terms of performance. In terms of passenger performance, last year was, leave aside the year of COVID, which I think was exception, but last year, probably the last decade was a year of unexpected multiple small disruptions, short-term disruptions. Therefore, traffic was just about a little more than 1% for the whole year, which is very rare, right.
We're used to 8 to 9% levels historically as the annual passenger traffic growth. I think the first quarter, obviously this year, is continuing to be affected by the war-like situation. I think with the bounce back expected in the year, and expected to get back to normalcy, one can probably expect somewhere, I think whatever you read in the public forums and in reports, generally the expectation recent is FY 2027, maybe a 5% passenger traffic level is what's anticipated. I think that's, again, a lot of these things you actually see as time passes. In terms of your second question, I think the government obviously announces privatization of airports, and it's obviously a national subject, federal subject. In that sense, there is a clear pipeline of privatization. It's normally announced well in advance, and then these things move towards conclusion.
I think obviously post-COVID, that pipeline was announced. There are currently 11 airports that had been called out much earlier for privatization. The government, I think, reinforced that number as well, and the name of airports, and there is airports are being combined together. I don't believe that has changed. Probably, I don't think Calcutta, for example, being added in or anything or any changes on a state level currently may change that privatization schedule. At least it was public in terms of information that we've seen around it.
Right. Then my final question is around the pricing environment at the airport QSRs and business lounges, especially given the fact that energy prices are escalated or increased, rather. Do you see you guys are able to pass on that pressure to the customers, or do you see that could actually have an impact on your profit margins?
One thing just to make a note is, one, it's obviously input cost pressures generally are there, but you see particularly our industry. A, as a starting point, a large part of our real estate in any event is on electric equipment, by nature of being in airports. That's a nuance of our business, very different to most other F&B players. That natural hedge or that natural piece is just there in this time. Aside from that, the inflationary pressure on the ground on food has not paid up as significantly, probably, I'm guessing, as some other parts of the economy may have mentioned out. There are elements playing out in food in terms of inflation. Until now, I think whatever we've had, I think it's been around the 3%-5% mark in April there.
I think we've been able to manage that quite effectively. I think that much you pass on to consumers in the domain where we are operating. It is an environment where we take price hikes in light of inflation, but currently we're not seeing anything dramatic on food inflation playing out currently. Also, our supply relationships tend to be anchored in annual contracts for many of our key products, these are larger suppliers. Therefore, on their side as well, I'm sure their hedges and all play out when they do with large players like us annual contracts. We've made our business model quite robust in terms of how we deal with these year-on-year. Irrespective of what the underlying reason is, I think our business model itself, our commercial model is quite robust when dealing with these situations.
Okay, perfect. Thank you so much. I'll come back with you.
Thanks, Anchal Kumar.
Thank you. The next question comes from the line of Akshay Krishnan with ICICI Securities. Please go ahead.
Hi. Thanks for the opportunity. My question is on the airport side. We've been seeing that the airport is actually getting sophisticated in a lot of different ways and also the lounge operation being grown up because now you have the aspect of more international brands that's coming in. The part of the question is, are we seeing the airport operators retaining the higher concession fee? How should we think on the long-term sustainability of the TFS economics in this?
Yeah. Thanks, Akshay, for the question. In terms of this is a thing we have seen throughout. I don't think there's anything, obviously, what's generally changing, accelerating in a country that's fast-growing like ours is, per capita income's rising, people wanting to travel, people want to experience. Therefore, undoubtedly, F&B, I think that's a general trend even on the high street. People are spending more money towards experiences, F&B dining, I think premiumization very much obviously playing out to a much greater degree in airports. The first part of what you said, very true. Some of the brands I mentioned earlier when I was giving my initial intro. I spoke about some of the brands, Nando's, Wagamama. These are brands, Gordon Ramsay, considered the world's most famous chef. Those brands coming to India, opening first in airports.
I think Gordon Ramsay came, his first store there is an airport. That's opening up experiences for customers. Indian consumers are excited by it. They understand these brands. Yes, there's a good amount of spend going there. At the same time, the point on concession fee, that's a normal exercise. That comes up whenever I don't think there's anything changing there. These are constant rental discussions at every point in time. Some rentals are paying more, some rentals are paying less, but it's a portfolio approach. Across our real estate, we look at a portfolio. That's why our presence is not driven by any individual store. It is driven by an entire approach across the board. There's nothing dramatically different. This is constant as it would be, and that's how the rental model runs. I think our skill set is our commercial model.
Our scale allows us to deliver the profitability we do, irrespective of any of these situations, which is a very good example for this year. One would expect with the traffic numbers just being about flat or 1%, but we are still able, with our commercial model, to deliver delta in terms of performance. I think that's what is the ability and the scale that our company is able to do.
Perfect. My second part of the question is on the lounge business. We've been seeing the banks meticulously tightening up the credit card and the swipe systems. Have we reached a point or is there an inflection stage wherein the lounges are more being driven by the consumer habits, or is the industry still heavily dependent on the bank for that access of the lounges?
Yes, no doubt. Lounges, I think starting off are proving a very important element for the consumer journey. Just for premiumization, lounges are a great avenue for that. If you see in reality, a lot of the news on banks or credit cards, et cetera, reducing access. This has actually been happening, if you look back, it's for the last 18 months. In every quarter, obviously, there's a bit of news, but it's actually been happening for 18 months. The reality, the way it's happening is a bit different. The reality of the way it's happening is, the larger part of credit cards, no doubt, if you could call it that, is a mass-market credit card pool, right? Those areas is where the growth is much less, in terms of new cards coming in.
Those are the areas banks are looking and saying, "Okay, that consumer maybe spends a bit less what they do." Therefore, restrictions are there on access. In reality, the other end of the segment, which are your premium cards, and from whatever you read out there, premium cards are growing versus maybe probably high single digits for the mass market, low double digits. Premium cards are growing in a complete other end of the spectrum of more than 50%. You read any sort of numbers out there in different reports, different things. That segment is growing dramatically faster for banks because of premiumization, and that is where actually access is going the other way. Many more cards than before are now getting unlimited lounge access. You even take a guest.
If you go for some of the premium cards, you can actually take a guest out there. What's happening, I think, Akshay, very clearly is that the market is diverging and banks are approaching from a nuanced perspective, saying, "Okay, mass market cards, you spend, thresholds are being introduced, you spend more, I'll give you access."Whereas premium cards, where consumers are coming in, maybe paying an entry fee or they have a very high spend already, and they are getting actually more access. In reality, if you actually go and scratch below the surface, the reality is the premium cardholder is your frequent flyer. A mass cardholder may fly once in six months for a holiday or for work. The frequent flyers who may be going three, four, five times a month are the guys with premium cardholders.
For us, it actually matters that consumer is coming five times, spending five times, versus the mass-market cardholder who may have three accesses in the year, but he probably flies three or four times in a year. In reality, that's why you can see our numbers actually, even though this has been in play for 18 months, being quite strong through this entire period as well.
Got it. Very true, sir. My final question on the Eats. This is becoming more valuable. My question is, this is more on the individual airport concession part, or should we think that it's purely a support player of the existing business?
Sorry, I missed that question, Ash. I didn't get If you don't mind.
I just wondered, could Eats become more valuable than an individual airport concession part? Should we think that purely it's a support player of the existing business? What are the growth levers for the Eats business do you see, proceeding in the medium-term business?
Yes. No, correctly. I think Eats is obviously providing direct, what clearly is a technology platform that we've put in place that provides direct, basically a LAM or a lounge access management for banks and card networks for a direct bank to lounge access. That is where it obviously starts to focus on. The biggest reason was customer experience improvement, right? You understand the consumer better. You work with your banking and credit card partners, network partners, and say, "Okay, different experience for different consumers." Someone goes to a lounge, someone goes to a VIP zone, someone gets complimentary, say, during an IPL match. I want my premium customers to get a beer at the bar. You can access that because we're today directly talking to the lounge operator, us through our own technology platform. That is where it comes in.
I think at the next level, while this puts in, obviously it builds also to some degree the financial upside as well. Also, tomorrow, once you have a platform in place, additional services. Today, we are providing meet and greet and doing porter services in airports. We're doing that in some of our airports. We have lounges. What stops you from integrating that aspect too? That's the plan. Once you have this platform, once users are there, once the apps are there, you leverage, you add value, and that's the advantage of having that direct connection. No doubt, I think it's both. It makes consumer experience better, which is the starting point. It makes it seamless, but also provides tomorrow, obviously better financial upside, but tomorrow, larger growth opportunity.
I think it addresses all three avenues, which is why it was a critical area we worked on and successfully executed in the last year.
Got it. One question, if may I. The Q4 EBITDA margin was particularly stronger. If you look at what is the margin improvement was structurally versus the temporary benefits, and how should we look at it going forward?
If you see, maybe I can ask Vikas to jump in here and take you through those as well. Yeah.
Sure.
In terms of the margin that we have seen, specifically on the gross margin side, as I mentioned, we did have a one-off reclassification of cost of services of roughly around INR 78 million. But even if you take that impact out, you are roughly around that 84% on a YOY basis, on a full year basis. Like I've said in the past, that due to those procurement efficiencies and the scale at which we operate, our gross margin will be in the range of 80%-83%. What we have also seen is, as a go forward, we do anticipate a bit of inflationary impact due to the Middle East conflict in terms of the LPG price increases and various other factors.
We believe that our gross margin for the next year will be in the same threshold of 80% to 83% on an overall basis.
Okay. Thank you, and good luck, sir. Thank you.
Thank you.
Thank you. Before we take the next question, a reminder to all the participants, you may press star and then one to ask a question. Your next question comes from the line of Purva Zanwar with 361 Capital. Please go ahead.
Hi. Thanks for taking my question. I had a question on the new contract which you got for Bhogapuram Airport. Can you specify a little more details about it, the number of outlets and the tenure, and when should it start contributing?
Yeah. In terms of Bhogapuram, it's one which we've got. It's under GHL, where we're operating there. Bhogapuram is a new greenfield airport coming up in Visakhapatnam. There, it is a long-term contract once again that we've got in that case. In that mobilization, while the exact phasing and all may happen, but roughly, our expectation is probably we look at about seven outlets happening originally, and that's the current plan. Probably as we get closer to the date, we'll share more details around the mobilization and other aspects of that contract.
Sure. The second was that our finance cost has increased drastically. What could be the reason for the same?
Hi, Purva. Our finance cost has increased mainly on account of a provision for litigation matters that we have made during the year of roughly around INR 212 million, which has been provided. While we are conservative, and in terms of our own contention, we believe that we have a strong case on merits, but as a matter of prudence, we have provided the full amount of INR 212 million in the finance cost.
Okay. Lastly, you mentioned that because of the scaling up of the Eats business, our receivable days have increased. Can you just explain in detail more what led to this increase in receivables?
As you are aware that we kickstarted our Eats business somewhere in the Q3 of this year, more towards the start of December, wherein we were signing up contracts with various banks and card networks. A large part of the Eats billing and the revenue unlock that has happened, has happened between the last four to five months. From that perspective, this was a new relationship that we were developing with the banks in terms of operational efficiency, billing procedures, and the process that the banks wanted in terms of system efficiencies and integration. The debtors for the year-end have shot up to roughly around INR 264 crores from an average of INR 110 that we have seen.
What we believe is, basis the current collections that we have received subsequently as well as overall basis, that this should normalize by the first half of this year, and we should be back to our average of around 40-45 days of outstanding.
Got it. Thanks. That was so much.
Thank you. The next question comes from the line of Aachal Pal with MNCL. Please go ahead.
Hello. Yeah, hi. My first question is on how should we view traffic growth trend across key airports, especially after disruptions related to Middle East conflict?
Yeah. Thank you for the question. In terms of the way I think we look at traffic, and probably relating it back to what I mentioned earlier. For the full year, obviously you saw traffic, as I mentioned, about 1%, just over 1% for the full year. Now this started, if you go into particularly Q4, this was a thing where January was a bit up, we saw February flat and March being the one where the depression happened. You can look at that basis where I think the main reason for that has been international traffic. International traffic saw nearly a double-digit dip during the March and April period. While domestic actually was quite robust, it was largely flat.
It was actually international traffic and more in airports that are, yes, in the south that are flying to the Middle East more, and a few other areas which have international traffic like Goa, Dabolim, few other airports which are a bit more affected. We saw those set of airports, traffic logically going down a bit more there.
Okay. Second is on the lounge business side. Are we seeing any challenges as the growth has moderated slightly?
Actually, it's been quite robust. When you see the numbers potentially, probably it's been more robust. Obviously, the factor which is laid out has been traffic. Traffic, obviously. Irrespective of traffic, I think we've been able to grow, whether you look at our system-wide sales or consolidates, but if you look at, I think broader perspective, system-wide gives you a perspective of the entire business. Our sales have grown for the year 25%, more than that.
Which gives a sense that even though traffic has been just 1%, sales still have grown quite robustly out there. That's where we've been able to, whether it's been travel QSR or lounges, we've been able to grow quite strongly. While yes, the traffic is a key determinant, and yes, if traffic numbers were better, I think the year could have been even more superlative. I think that's where the robustness of the commercial model steps in.
Okay. Sir, how are we seeing the revenue ramp-up physically for newly added outlets and airport lounges?
I think it's quite strong. We're seeing traffic generally across the board coming back quite well in May. I think that you'd see anecdotally happening from what was there, the weakness in March and April. I think that's been evident throughout the last year. Every disruption that's been there, it just bounced back so quickly. Just showing you that, I think no one doubts the long-term structure story, but obviously even on the short term, it's surprising with which the speed at which the recovery happens. Obviously, the amount of disruption that happened last year, still for a patch growth to happen, has been something that has been very robust.
I think that continuation of recovery looks to be very much on the cards now. Especially once the conflict mismatch, once the war-like situation, which we all hope gets resolved at the earliest, the anticipation is that the demand would be strong. Like I said, domestic is still maintained to be quite robust irrespective. I think it's just this element of international traffic, which logically does come back when the Middle East places open, when some of the pressures around crew hopefully fall away. The combination of those would have an effect on getting a bounce back in that traffic. Yes, currently, as you can see, domestic actually probably recovering. Likely with some of the travelers who are planning maybe international are actually going domestic. May fly more domestic. You may fly one international trip cost six.
You may spend domestic half that or maybe one third of that, and you therefore could take three trips. For us.
We are agnostic to whether a consumer is international or domestic, because he only spends on food or something like that, a similar type, where for an airline ticket he has to spend more. For food, it's not that you're going to eat more international versus domestic. Actually, to some degree, as the bounce back happens and hopefully domestic comes back quicker, it may actually have a positive effect on the bounce back.
Okay, got it. Now my last question is, any new airports in the pipeline that the company is bidding for? What would be the CapEx plan for the next two years?
I'll leave it let Vikas jump in a bit of the CapEx, but as a general plan, we do look at airports in this sector consistently. As opportunities come, we constantly bid for them. I think we obviously look at the larger airports, as you're aware, from our scale and size which today present. Our entire footprint is 20 airports. Obviously, Gurgaon and Noida coming up, two more airports are currently in the works in the coming months. That's the pipeline. We at any point in time, we have multiple outlets in our pipeline, which we also currently, we have multiple outlets in the pipeline. I think it's roughly about more than 50 outlets we currently pipeline. This is aside from any future bids and all. These are things which are already committed. We have quite a robust pipeline. We've always had it.
I think for those who've been part of our calls, I think every quarter we've been quite strong in terms of openings. That looks to be even stronger going forward. Yeah, that's been, I think, the sector irrespective of short-term disruptions, looks to be very, very robust. I'll leave Vikas to jump in on CapEx.
Thanks, Varun. Just to add to what Varun said, we do have visibility of more than 50 odd outlets in the pipeline, and we expect the CapEx on an average to be in the range of INR 50 crore-INR 60 crore every year, which would also be the case for FY 2027. The CapEx would be predominantly for mobilization of units that we have to do in the recent won concessions of Delhi, Cochin and upcoming other projects.
Okay. Thank you so much.
Thanks.
Thank you.
The next question comes from the line of Praneeth Reddy with Kotak Institutional Equities. Please go ahead.
Hi. Thank you for the opportunity and coming up with a good set of numbers. My question is to understand the steady state LFL for the business. The objective is to understand what % of LFL growth can come from pricing and premiumization levers and what % can come from traffic growth and penetration, just to understand the breakup of LFL that we are looking at in more of a steady state.
Yeah. Thanks for your good wishes. Yeah, thanks for the question as well. In terms of what we've seen, a general trend we tend to see historically, and I think it's been playing out at all points, is that the way we look at it, our LFL, and again, if you take a step back, is normally divided into three components, right? One part is passenger traffic, which again, largely out of the hands, but that's driven by what the airport. Normally in India, we've always seen a 7%-10% level of passenger traffic historically. This year, like I said, was a year of multiple disruptions. We saw that quite wide from that. That's been the level.
Then on top of that, what we see above that, you see a combination of price inflation that obviously influences the growth and the LFL plus our initiatives. Maybe 5%-6% price, 5%-6% our initiatives could be around changing a brand, could be around combo offers, could be around new products in a unit, premiumization that we play. Multiple levers like that. Every year we're doing something. When you go to an investor deck, we can't put every single marketing for every month. We have multiple initiatives. We just give you a flavor of what we do. In every quarter, we try to add something that can give a sense of flavor to stakeholders about what's happening.
In a sense, all of that coupled together, you can say tax plus roughly maybe somewhere in the range of 7%-10% incremental above that is a combination of price plus initiatives. That's the best way to look at it, in terms of you add that and you look at LFL. Again, you want to probably look at it over a year because you have elements that we have new outlets opening in certain terminals, some outlets changes, all of that. Over a period of a year, it tends to average out to that general rule we've seen that play out over the many years we've been operating in the segment.
Got that. Thank you for that. My second question would be on the capital allocation part. Now we have a strong cash balance of more than INR 8 billion, including investments, and that's as it is called out, the CapEx requirement might not be more than INR 60 crores. Now, what are our views in terms of capital allocation, and how do we see areas like duty free or retail in the airport space itself? Is that an area of interest for you or we are just focused on that with our current business for now? Thank you.
I think, in reality, yes, I think the cash we've been quite disciplined as a business over the many years, and you can see that we've, hopefully, the quality of earnings, we make sure that ultimately cash is king. We've made sure a consistent part of generating cash, building up a reserve, and obviously investing it as well. I think this year, like Vikas talked about the investments we already have visibility, obviously, new opportunities come, the international lounge piece. The sector, if anything, is growing exponentially. Our ability as a company today where it is not only catering to the sector in India, the speed is growing. I think the next few years will be probably the best period for Indian aviation. I think in every statistic you see that call out.
In terms of even the opportunity with the scale and size we have and the success we've seen in international lounges, that's a very, very attractive opportunity for us to go globally. We've already gone, as you know, into Malaysia. We've opened a second lounge in Hong Kong in the last quarter, showing our continued success in that area. On top of that as well, expressways, what the government is currently doing. Again, it just started. The investments have started. This probably is a bit more long-term opportunity, but we've got today the capital to be able to do that. We're completely debt-free. I think the combination of looking at those opportunities is strong. As you can see, our ROCs have been at north of 40%, about 45% ROCs. Very compelling investments. We're quite disciplined about it.
We have been quite disciplined about it throughout that period. I think it's not that something that's come now. It's been since the very beginning, the last 17 years of being there have been clearly driven, built on those principles which are very much part of our DNA. I think that's the way we approach investments and the ability to look. We've got these funds and we'll continue to make prudent and aggressive use of it. I think a good combination is the right way to look at it.
Thank you so much.
Thank you.
Thank you. The next question comes from the line of Sanjay Ladha with Bastion Research. Please go ahead.
Yeah. Hi. Thank you so much for the opportunity and congratulations on a good set of numbers, sir. I wanted to understand our strategy on international markets since we are so much focused on international market, how the SSP Group has given us the LOI for Middle East, and you are also talking about Hong Kong and Singapore. How we are placed on and how is the strategy going forward? Is that similar to Indian domestic market or we are doing something differently over there? These markets are already there and they are quite mature compared to Indian market. How you think on that side?
Yes. No. Thank you for the question, Sanjay, and thanks also for good wishes for our results. In terms of where we see, and a right question, so where we see our opportunity on international, yes, we have been a very successful business in India. We've become a market leader clearly in the segment of both travel QSR and lounges. What we do see, and we called this out even when we had come on previous calls as well, we do see the international lounge opportunity or lounges particularly going through a very interesting, as you say, development globally. I think India has been largely at the forefront of it, we're seeing that trend play out globally. More and more lounges coming in, and these are not only airline lounges, credit card, other services, banks. This is happening globally across.
The opportunity of what I think we've done in India in terms of lounges being a bit ahead of what's happening globally and taking those learnings and actually going globally. The fact what we did, we are very successful in Malaysia. We expanded the footprint considerably there now to four airports. In Hong Kong as well, we opened one lounge the previous year. We've opened one lounge now in the last quarter as well. Part of that strategy, we've opened a subsidiary in Dubai to look at Middle East opportunities. We're also looking at the Indonesian market, a very large market. We've opened a subsidiary there as well in the second half of last year. These are clear opportunities for us. Our skillset which is there, which is the advantage of it.
A lot of the relationships we've built up over decades, whether it's your airline, whether it's your card networks. A lot of these are relationships that transcend borders. The same card network, the same airlines that are in every country. You're developing those relationships for over a decade. When you go in those markets, coupled with, Sanjay, to what you said as well, rightly so, the SSP presence in these markets. They're on the travel QSR side. They've been in many of these markets for years. Leveraging that relationship, they know who the right contractors are to construct outlets. They've got experience. They have suppliers in place. Therefore our journey to going is assisted with that as well when a key stakeholder has that.
Therefore, there's a clear right to win for TFS in that segment, and that's why we're very clear strategically focused on this area, and we're confident to deliver on it over the next few years.
Sir, all this international expansion would be with our parent entity or we see as a standalone entity going outside there as well? How this things?
The starting position always you go as a standalone entity. If you have the ability to take advantage of, now it could be SSP because obviously they are, as a key stakeholder, they provide assistance, but it could be other partners as well. I think those are decisions that are taken based on the rationale or the benefits of each opportunity. I think that is on a case by case. Yes, the starting position is always to go and look at these opportunities on a standalone basis. That's the way we strategically look at it.
Sure. Sir, my another question would be on growth prospect. Wanted to understand that the industry volume over longer term is expected to grow by 9%-10%, as you rightly mentioned in the previous con call. Our LFL growth remained at around 9%-10% with inflation at 3%-5%. Combining all together, is it fair to assume that without adding new airport, our revenue growth should be roughly at around 22%-25%? This is there over the last years as well in the hotel. Is it the right understanding? I'm not talking about for FY 2027 onwards. I'm talking about 3-5 year time frame-wise therefore I'm asking this.
Sure. Yeah, while I wouldn't call an exact number where I would sit on because some factors, but just using your logic that tomorrow, yes, if traffic comes back to level we're used to of 9%-10%. On top of that, what we, yes, have seen historically is that 7%-10% delta in terms of combination of obviously inflation plus our initiatives as well. Yes, with that kind of underlying thing, one would expect to see 18-20 around that part of LFL. I think it would be a normal perspective. Obviously, our business is a combination, as our results show, of quite healthy LFL plus net gains. We're in a market which is fast-growing where India is, for any sort of statistic. We are today our population at 1.4 billion. We have just 30%, a 0.3 of our population flying. Don't look at the U.S.
I always give the example, U.S. is at 5.5 times its population flying. Even China is almost 1 time its population flying, if you see that, 1X. We are already 0.3 versus 1X of the population. China, 10 years ago, was at the same statistic, about 400 million passengers. At India, the way we are growing the propensity to spend, per capita, the way the government is doing initiatives around fueling the aviation industry, there's no reason we should actually do it quicker. That's why we're very bullish on the trajectory of Indian aviation, as I think both Vikas and me very clearly stated. I think that's something across the sector, that anyone in the sector has that very long-term approach, undoubtedly.
Sir, my last question.
Sorry to interrupt, Sanjay Ladha. We request you to return to the queue. Thank you. For follow-ups. Your next question comes from the line of Swapna Shelar with Baroda BNP Paribas Mutual Fund. Please go ahead. We have lost the line of Ms. Swapna Shelar. We'll move on to our next question. Our next question comes from the line of Anchal Kumar. Please go ahead.
Yeah, hi. Thanks for another opportunity. Basically, one, I wanted to understand, how do you see this Mumbai airport allowing Blinkit to set up a shop and deliver at the doors or at the gates? Do you see it as a threat to your business? What happens if it expands beyond Mumbai?
Right. Yeah, Anchal. Anchal, in terms of this particular thing, not would be exactly relevant for us because obviously what it is more of a retail, right? Retail presence, while obviously we're doing this with Blinkit anyway, not something that we're monitoring or doing, how successful or not it is. Generally, retail presence has always been there at airports, right? Already there are CTM shops, they have smaller footprints, limited products. Probably what Blinkit is trying to do is that some products which can't fit in there, they'll have some presence outside, so you order it, and you can get it for consumers. Otherwise, you see these shops in airports that do chocolates, books, other retail products, et cetera. I mean apparel, whichever it is. That's one piece. I guess from our point of view, ultimately an airport, F&B is very different.
As a starting point, we already have food at gate. You know I've spoken many times on it, which is where we already deliver to gates. We have grab and go, all of that. Ultimately, food, unlike retail, where you have a dark store, food you need to pick it up from the stores. In an airport, assuming we operate the stores, we are providing that through food at gate. We are providing that already there. I don't see how it's very different probably from food, I guess it's more of a pilot that probably Blinkit is trying in terms of seeing from a retail piece. Yeah, surely not relevant to food as a piece because that's a bit different. Where that you order from your favorite restaurant, that comes to you, it takes some time for delivery in there.
This has got a secure area, so retail you probably keep some products in the secure area. Food, you need actual kitchen, which is where the outfits already operating in the airport have their kitchens. Those type of things is probably the way to look at it.
No, you're right, Varun. I think you're right that there are other shops, but of course, we are selling it at sort of MRP, and that could make a huge difference, isn't it?
Yes, in the food you want, like Anchal for example, they would be selling more retail products or something. A person coming to the F&B outlets would come for the F&B experience. They would come for the brand. They would come for those elements. Today also you go to a retail shop in the airport, you can buy a food item or something there. In other words, the food experience they're coming for, and ultimately if to deliver all the food, there was always vending machines, CTM anyway was there in airport. In terms of this, they're probably addressing by saying, okay, items that are not there, I'll have a dark store. I can maybe get those items to you, something of that nature. Visibly, I don't know how it has actually done. From a food point of view, you can't do that, right?
If you want a dosa, you want a food product, you want a burger, ultimately, it has to be made at a kitchen and produced. I don't see it unlikely to happen from a food angle play out in that manner. Probably very different consumer subsets are there. There's no really probably overlap in a consumer need state with them.
Right. A small confirmation, just to cross-check. The terminal three is going to move to your GHL in September, right? Is that confirmed?
Our tender for Delhi T3, which we'd always called out, was expiring in February. I think we also at that, I'd mentioned that we got an exhaustive extension on that for six months. It was operating through a special purpose vehicle, which had a life tied into that concession. Obviously when it comes up, we look to bid from our existing JV, which is GHL. Obviously when that expires. It was supposed to happen in February, it got a six-month extension there.
Okay, perfect. Thank you so much.
Thank you.
Thank you. Ladies and gentlemen, we will take this as our last question for today. I now hand the conference over to the management for closing comments.
Yeah. Thank you. Thanks for that. Thank you everyone for joining in, and thanks to the ICICI Securities team for hosting us, and we generally appreciate all of you taking this time today, joining us for this earnings call to post our Q4 and full-year results. If you have any further queries as well, please feel free to reach out to our investor relations team. Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you everyone for joining us, and you may now disconnect your lines.