Growth Strategy
TBO Tek Limited has a clear and aggressive growth strategy focused on three key areas:
- Geographic Expansion: The company has expanded its sales presence in 15 new countries and 40 new cities, including key markets such as Australia, New Zealand, France, Germany, Japan, and Romania. New legal entities have been established in Indonesia, Greece, and Israel, setting the foundation for deeper market penetration.
- Product Diversification: While hotels and flights remain core offerings, the company is expanding into sightseeing experiences, car rentals, transfers, and Umrah services. The launch of “TBO Platinum,” an exclusive tie-up with luxury hotels offering benefits like room upgrades and special perks, enhances the company’s premium segment offerings.
- Technology & AI Integration: Investments in AI-driven automation, such as AI-powered search for hotels and a voice bot for supplier communication, improve efficiency and enhance customer experience. A bot that automatically processes supplier emails has significantly reduced workload, boosting operational efficiency.
Future Outlook
- International Market Penetration: TBO Tek aims to strengthen its presence in Latin America, Europe, and the Middle East, where it has witnessed robust growth. Europe, in particular, has grown 90% YoY, led by acquisitions like Jumbonline.
- AI-Driven Efficiency: The integration of AI in operations is expected to enhance customer service while reducing operational costs, allowing the company to scale efficiently.
- Growth in Hotels & Ancillaries: The segment has grown by 48% YoY, with a 52% growth in gross profit, driven by international expansion and strong demand for premium travel accommodations.
- Potential Mergers & Acquisitions: While nothing has been finalized, TBO Tek is actively exploring acquisition opportunities, particularly in North America.
- Macroeconomic Tailwinds: Initiatives like the Indian government’s UDAN scheme, expansion of airports, and increased disposable income among premium travelers support long-term growth.
Challenges
- Forex Volatility: The company reported a ₹12.48 Cr forex loss due to sharp movements in USD against other major currencies. While natural hedging mechanisms are in place, currency fluctuations remain a risk.
- Seasonality & External Factors: Ramadan in Q4 is expected to slow down business in the Middle East and Southeast Asia, highlighting the company’s exposure to seasonal variations.
- Competition in the Domestic Market: While TBO focuses on outbound premium travel, increased competition in the Indian domestic hotel sector could limit expansion opportunities in this segment.
- Integration of Acquisitions: The successful monetization of Jumbonline’s inventory within TBO’s ecosystem remains a challenge, with expected slower growth in this mature business.
- Regulatory Risks: With the UAE implementing corporate taxes from April 2024, taxation and regulatory shifts in different markets could impact profitability.
Is TBO Tek a Good Investment?
- Strong Growth Metrics: The company has shown consistent YoY growth, with revenue increasing 29% and EBITDA growing 26.1%. The international segment, in particular, is expanding rapidly.
- High Gross Margins in Key Segments: The hotels and ancillaries business, which has higher take rates, is becoming a dominant part of the company’s portfolio, improving overall profitability.
- Cash Flow Strength & Negative Working Capital: With a strong cash balance of ₹1,335.5 Cr and negative working capital, TBO Tek is well-positioned for future investments and acquisitions.
- Scalability & AI Advantage: Investments in AI-driven automation and customer engagement tools are expected to improve efficiency, customer retention, and profitability.
- Market Leadership in B2B Travel: TBO Tek is among the top four global travel distribution platforms, with a vision to become the largest in the industry.
Final Verdict: TBO Tek is a strong investment candidate for long-term growth, given its robust expansion strategy, high-margin businesses, and strong cash position. However, investors should consider forex volatility, seasonality, and integration risks while making investment decisions.