Travelling Indians bring forex firms on investor radar

ET Intelligence Group: India has become one of the fastest growing outbound tourism markets, second only to China. India’s outbound tourism has grown multi-fold in the last 10 years to near 20 million tourists currently. The World Trade Organization expects this number to reach close to 50 million by 2020. At the same time, average amount spent on overseas travels by Indian tourists has almost doubled.

Currently, the total spend by Indian tourists is close to $20 billion and is estimated to grow at 12 per cent CAGR for the next 10 years. Several companies are likely to benefit from this trend but very few are listed. The best way to play this theme on the stock market is through forex companies such as Weizmann Forex and Thomas Cook, which have also gained from the shift of customers from unorganised to organised forex providers, especially after demonetisation.

Both the companies are Authorised Dealer – Category II from RBI, which according to experts, is not easy to get, and only a handful in India have this licence. According to the managements and an industry person, these players do not compete with banks; in fact, banks rely on these niche players with physical infrastructure to reach customers.

Weizmann Forex
It is the largest independent forex provider in India. In the second half of the fiscal, after demonetisation, the Mumbai-based company saw revenues jump 28 per cent and adjusted earnings by 150 per cent year-on-year as customers moved to the organised market. Retail customers offer the highest margin spread of 1.2 per cent as compared to 0.3 per cent by wholesale customers and 0.6 per cent by corporates. The company has brought in a new management to leverage on this opportunity and grow its retail and corporate divisions.

The company, with a good online presence, has 200 branches and intends to increase the number. It has given a growth guidance of more than 25 per cent for the next three years.

According to the management, higher number of Indians seeking education abroad and more and more events happening overseas — both corporate and personal will drive growth. In FY17, Weizmann’s revenue was Rs 5,983 crore with adjusted net profit of Rs 29 crore and its market capitalisation is Rs 970 crore. It is expected to do Rs 42 crore net profit this fiscal.



Thomas Cook
Like Weizmann, Thomas Cook too offers forex services through its 236 outlets across India and is a strong player online. Already an established player, Thomas Cook will also benefit from the acquisition of SOTC, a tour operating company.

Its forex and other travel business revenues jumped 71 per cent in FY17 and operating profits 37 per cent due to one-offs. These two businesses have grown at a CAGR of near 20 per cent for the last 10 years. It also has other businesses including resorts under the brand Sterling and human resources business through its subsidiary Quess Corp. But, forex and travel related business contribute most of the standalone operating profit, while resorts business is currently making a loss and is expected to show a turnaround in the next two years.

A possible demerger of Quess Corp would further unlock value. However, the company has made no mention about this. The stock is currently trading at Rs 234.3 and according to Bloomberg, consensus target price is Rs 294. The stock is trading at 45 times its expected FY18 earnings.