• Leveraging Strong Brand Equity : Being one of the oldest and better recognized holiday brands both, locally and internationally, it not only helps the company to attract customers but also helps it to retain talent. In the future, it can continue to leverage its brand equity to offer better products and expand its offerings alongside its reach. This will help C&K to diversify in the industry without having to spend excessively on branding and undertaking promotional exercises.
  
  For instance, the company has recently forayed into visa processing services for diplomatic missions which have thus far been concentrated in the hands of a few players. It is also in the process of rolling out a pan-India luxury train under the brand ‘Maharajas’ Express’ through a joint venture with IRCTC. Such initiatives not only help the company to leverage its growth extensively but also help to increase its market share.
  
  
• End to End Solution Provider - The One  Stop Shop : It provides end-to-end travel solutions including land, air and cruise bookings, hotel bookings, in-transit arrangements, local sightseeing, visa, passport and medical insurance assistance and such other destination management services along with other value added services. The company’s presence across the entire value chain in the fast growing tourism industry offers it a huge opportunity. Moreover, C&K appears well placed to capitalize on the Government’s initiative to encourage tourism in the country.
  
   
• Wide Network – Enhanced Geographical Presence & Reach : In India, C&K has 255 points of presence covering 164 locations. It also operates through a mix of branch sales offices and franchised sales shops (56) which enables larger access to customers. Further, it has an extensive network of 185 GSAs and PSAs covering many of the major towns and cities of India. With its global operations in 19 countries besides India being run through subsidiaries, branch offices and representative offices, the company has an extensive  reach.  The company is also a member of Radius Inc, a global travel company, which enhances it to reach more than 80 prominent countries across the globe with over 3,600 locations.
  
  
• Early Online Initiatives & Synergies : Moreover, the online travel market in India still at a very nascent stage with tremendous growth potential. Having firmly set foot in the offline market, the company also offers online services through its existing website www.coxandkings.com. C&K thus seems well positioned to capture a  new client base and also expand its reach without having to spend extensively on creating infrastructure. The synergies of operations with its subsidiaries and the economies of scale due to large scale operations enjoyed by the company is yet another positive. 
  

IPO Concerns

• Legal and Civil proceedings : There are various legal and civil proceeding against the company. The amount involved is these matters (including its Associate companies – Tulip Group) aggregates to a sum greater than the net worth (Rs 2,280 million in FY 2009 and 2,770 million as on June 2009) of the company. 
  
  
• Cyclical & Vulnerable Industry : The travel and tourism industry is highly cyclical in nature and is intricately linked with the economic growth of the country. Further it is highly vulnerable to terror attacks, epidemics and crisis that could adversely impact the travel of both classes, leisure and business. 
  
  
• Exchange Rate Risk : The business model of the company demands that it  maintain inventories of certain foreign currencies. To that extent, the company is faced with exchange rate risk. However being nominal, the overall impact may not be high. The Indian operations of company may not be exposed to such risk as the customers are charged as per the respective foreign currency in which it needs to pay its vendors. However in most countries (foreign) the regulations do not provide such flexibility which in turn enhances the risk for overseas outbound businesses.
  
  
• Crucial Working Capital Management :  As the company caters to different client sets including business travelers, leisure, bulk orders etc. the company either receives a part payment in advance or full payment before travel begins or 30-60 days after the date of travel (for bulk orders). However, most of its vendors demand advance payment at least to the extent of cost. All these factors thus make efficient management of working capital even more crucial. The working capital cycle of the company merits attention as the rise in aggregate debtors continues to exceed total sales over the years due to the business model (nature of operations) of the company.  
  
  
• Operates in a highly competitive and fragmented market. However, few organized operators also provide ample scope to increase its market share by expanding the operations of the organized sector. Further as compared to time share companies (likes of Mahindra Holidays and Resorts), tour operators appear relatively better placed due to a lower fixed asset base to maintain, even while being able to offer more destinations.
  

C&K Pricing Review & Verdict

Though the business is not comparable with time share companies, it stands to benefit from the low start up costs, which in turn also leads to a very low entry barrier. This is also reflected in the highly fragmented industry and number of independent players offering similar products at very competitive rates.

However C&K’s strong brand equity, wide geographical reach and successful track record offer some conviction about the growth in  earnings above the expected growth rate of the tourism sector. The inorganic expansion route which has widened the reach of the company has facilitated business synergies and business integration, which also infuses confidence.