In partnership with

Good morning.  In today's edition–why reviving the legacy of Cox & Kings is a formidable challenge; Paytm's cash surplus and potential shareholder returns; how 48 lakh weddings are expected to revitalise businesses; and the impact of Delhi's pollution on 3.4 million MSMEs.

DIVERGENT VIEW

Despite A Strong Past In The Indian Market, Reviving Cox & Kings Will Be An Uphill Task

Last week, the Singapore-based private equity firm Wilson & Hughes announced that it had acquired the once iconic tour operator brand Cox & Kings to operate in the Indian market. The 260-year-old company was originally founded in the UK to facilitate the transport of British soldiers in the colonial era. Over the decades, it grew rapidly and by 2018 it had offices in 27 countries with an enterprise value of US $1.2 billion. However, by 2019, in a bid towards rapid growth, it made several risky acquisitions leading to a mountain of debt of about US $650 million. In 2021, the Mumbai Company Law Tribunal ordered its liquidation.

However, despite the favourable market conditions for the travel, tourism, hospitality, and aviation industries in a post-COVID environment, the new move to bring back the Cox & Kings brand in India is fraught with risks and challenges. Primarily, they are: the challenge of reviving a legacy brand from scratch; key competitors like Thomas Cook and ITC’s International Travel House eating up the share of the market from Cox & Kings in its absence of three years; and the growing online marketplace for travel and tourism with a focus on technological innovations. 

Reviving a defunct legacy brand

The main reasons that Cox & Kings went down were alleged financial irregularities, money laundering, and funds diversion by its flamboyant CEO, Peter Kerkar. The Enforcement Directorate arrested him on November 26, 2020, and he has since been in jail in Mumbai. 

Sapna Popli, Professor of Marketing at the business school, IMT Ghaziabad, says that it is very difficult to revive a brand which has lost the trust of customers, particularly on ethical grounds. For example, Starbucks globally, despite not being mired in any ethical issues, continues to struggle to get back strongly into the market and regain customer loyalty amidst falling revenues, declining same-store sales, and a series of CEO changes, highlighting the difficulty of reviving a brand even when the challenges are primarily financial and operational. 

 In cases where a brand is trying to regain its lost customer goodwill, what is important for the success of revival is the right positioning of the brand in the customers’ mind, along with appropriate messaging. “This is going to be a difficult task as Cox & Kings had acquired a negative image in recent years in customers’ minds. Therefore, it will be a long haul,” says Professor Popli. 

Lost market share

Cox & Kings was shut down in India in 2021 during the Covid period. However, since the decline of Covid worldwide, the travel, tourism, hospitality and aviation industries have been on a roll. 

An India Brand Equity Foundation (IBEF) report says the travel market in India is projected to reach US $125 billion by FY27 from an estimated $75 billion in FY20. Similarly, the Indian airline travel market was estimated at  $20 billion in 2020 and is projected to double in size by FY27. Again, the Indian hotel market was estimated at US $32 billion in FY20 and is expected to reach US $52 billion by FY27. 

The CEO of a large travel agency says, “People have started travelling with a vengeance. Both domestic and international travel have been growing. The Meetings, Incentives, Conferences and Exhibitions (MICE) segment has come back to its pre-Covid levels. And travel from India to the southeast Asian countries has grown exponentially with most of them adopting a visa-on-arrival arrangement for Indian tourists.” 

While all this is good news overall for the travel and tourism industry in India, the reality for Cox & Kings is that it has missed out on this boom in its absence in the last three years, even as competitors have eaten up its share. It has to start from scratch all over again.   

Growth and consolidation of online travel agencies

A report by Mordor Intelligence says that the Indian online travel market is expected to cruise at a comfortable CAGR of 10.5% in the next five years. During COVID-19, many of the smaller online players shut down or got acquired in a phase of consolidation. Therefore, the market is now concentrated in the hands of large online travel aggregators (OTAs) like MakeMyTrip, Yatra, Cleartrip, Goibibo, and Booking.com. 

Backed by major private equity firms, many of these OTAs are also setting up physical shops internationally. Further, while some of the large traditional offline players like Thomas Cook today also have an online presence, competing with the big online players will not be easy for a new player like Cox & Kings. Apparently, Wilson & Hughes seems cognizant of this trend and has promised to bring in the best of Artificial Intelligence (AI), Machine Learning (ML), and data analytics. 

The journey ahead is undoubtedly an uphill one, and given the challenges outlined—rebuilding trust, competing with established players, and adapting to the evolving online market—it seems unlikely that Cox & Kings can once again reign supreme in the Indian travel landscape. The company faces an uphill battle to regain its footing and recapture market share.

MESSAGE FROM OUR PARTNER

Here’s Why Over 4 Million Professionals Read Morning Brew

• Business news explained in plain English

• Straight facts, zero fluff, & plenty of puns

• 100% free

See for yourself

CO:RELATION

Paytm cash issue

If you look at the 12-month price chart of One97 Communications, the company that runs Paytm, India’s flagship payment service, it will resemble a valley. From a peak, it fell to the bottom in February 2024 and has clawed its way back to where it all started. RBI imposed restrictions on the payment bank back then, and the company had to give up the business in favour of other banks. Paytm generates adequate cash to fund operations and does not need the Rs 10,000 crore cash on the balance sheet. 

Analysts tracking the company are excited about a potential payout that the company could make as it generates more free cash flows. They are also excited about the default loss guarantee (DLG) model the company announced, which will likely increase loan disbursements. Vijay Shekhar Sharma, the founder and the CEO, told analysts that the company board wishes to generate free cash for a long time before considering returning it to shareholders. Companies do that either through dividends or buyback of shares.

CORE NUMBER

48 Lakh

This is the total number of couples expected to tie the knot in CY2023, representing a 26.3% increase from the 38 lakh weddings recorded in the previous year. This wedding season is expected to revitalise sectors such as jewellery, apparel, hotels, and even automobiles, turning a potentially sluggish year into one of strong recovery, according to Business Standard. Industry experts report a 20% increase in wedding-related demand compared to last year, with the momentum expected to continue. In southern India, the surge is particularly evident in designer saree sales, where a 22-25% rise is anticipated.

FROM THE PERIPHERY

—🤝 India’s $250 billion IT outsourcing sector showed signs of recovery in the September quarter, with deals rising to 60 from 47, as per data from BNP Paribas. According to The Economic Times, Infosys, Accenture, and Cognizant led with key contracts, supported by a North American banking revival and a stable U.S. economic outlook. Previously, high inflation, rising interest rates, and client caution amid holiday furloughs had slowed growth. Despite no mega-deals, managed IT services hit $26.7 billion, signalling optimism as firms shift to longer, strategic contracts.

—🔼 Banking Financial Services and Insurance (BFSI) and flexible workspaces fueled India’s office space demand in Q3 2024, accounting for 39% of pan-India absorption, a 20% jump from Q2, according to Vestian, corporate real-estate experts. IT-ITeS saw a sharp decline, dropping to 23% from 38%. Total absorption hit 18.61 million sq ft, the highest this year, thanks to India’s GDP growth luring MNCs. Southern cities led the charge, with Bengaluru’s share surging to 36%. New completions reached 12.8 million sq ft, but Mumbai and Chennai saw dips. Vacancy fell to 14.8%, but rents remained stable, with Bengaluru seeing the highest appreciation at 1.1%.

—😷 Delhi and its neighbours—Noida, Ghaziabad, and Gurugram—are choking under hazardous air, with air quality index (AQI) levels maxing out at 500 in several areas, categorized as 'severe plus.' Tuesday marked a grim seventh day of relentless smog, driven by weather patterns and stubble burning in nearby states. According to The Economic Times, industrial production is limping, with over 3.4 million micro, small and medium enterprises (MSMEs) in Punjab, Haryana and Delhi, employing about 7 million workers impacted citing stalled construction and disrupted supply chains under GRAP’s Stage IV measures. Businesses are scrambling with cleaner fuels, air purifiers, and worker safety gear. Meanwhile, the Delhi government calls for stricter anti-pollution enforcement amid this public health crisis.

—💰 Private equity (PE) and venture capital (VC) firms invested in Indian startups are shifting their focus to long-term exits. While IPOs remain a favoured exit strategy, many funds are now reconsidering their approach to gauge post-listing gains. Anuj Bhargava of Lightspeed Venture Partners told Business Standard that the increasing popularity of IPOs as a lucrative exit strategy for PE and VC firms in India, noting that out of $55 billion in equity activity this year, $14.5 billion is through IPOs and $23 billion is secondary. Despite this trend, recent reports indicate that IPO-based exits have actually replaced secondary deals as the primary exit method for PE/VC investors in 2023.

SPONSORED

• Forward Future AI gets you AI-Ready: News, Education, and Community. Subscribe

• TechInsights AI Newsletter explore AI's full spectrum: trends, tech, policies, funding, innovations, and business impacts. Subscribe

SUPPORT THE CORE

Dear Readers,

Some of you have written to us expressing your intent to contribute to The Core’s journalism. While we currently do not have a subscription or membership plan, you can still support us by clicking the link below.

Another way to support The Core is by sharing this newsletter with like-minded people in your communities, colleagues, friend and family.

Was this email forwarded to you? Subscribe