Cox and Kings - IPO

Business Prospects:
The company's domestic business is leisure travel, corporate travel, forex and visa processing. while it designs packages for both individuals and groups for their domestic and international travel -tagged outbound travel, it also offers destination management and ground handling services for foreign tourists visiting India. C & K has also built a web of subsidiaries that complement each other's business offerings. for instance, while on the one hand, its overseas presence through its subsidiaries help attract business for the domestic inbound business, on the other hand it also help keep a check on service levels and costs. similarly, its UK subsidiary, ETN, that does destination management for European sites stands to gain from its acquisitions in Australia and the US. the high synergies and travel volumes afford the company better bargaining power with airlines and hotels. other ventures such as Maharaja express, a luxury train to be launched in January 2010 in collaboration with IRCTC and visa - processing business for which it has received approvals from six countries, also offer long term growth potential.
Marketing Strategy:
C & K has presence in 19 countries in India, which made up more than half its overall revenues last year, the company has 255 points of presence covering 164 locations through a mix of owned and franchised sales shops, general sales agents and preferred sales agents.
Results:
Over the last three years, C & K has grown its revenues and profits at a compounded annual growth rate of about 66% and 80% respectively, in the same period, it managed to expand its operating profit margin by 10% points to 42% attributable mainly to increasing interest burden, the company's NPM fell to 22% from 28%.
IPO Proceeds:
C & K is seeking to use a portion of the IPO proceeds ( Rs 129.6 crore ) to repay loans. its interest outgo can be expected to come down significantly. C & K also plans to earmark IPO proceeds for acquisition ( Rs 150 crore ) , invest in overseas subsidiaries and upgrade corporate office.
Offer Details:
the company seek to raise Rs 584 - 610 crore from the issue, which also comprises an offer for sale of 30,46,640 equity shares. the offer is open from November 18 - 20.
Conclusion:
Medium term investors can consider to subscribe the initial public offering of the global tour operator Cox & King. the company's strong brand image, wide geographical reach - both within country and across major global markets - synergies of operations between its various subsidiaries and the economies of scale. it is a positive for the offer. the highly fragmented domestic travel market, with few organised tour operators also leaves sufficient scope for market share gains. the valuation is at discount compare to Mahindra Holidays and Resorts. this is Good for medium to Long term investors.