Q1 2027 Travel Food Services Ltd Earnings Call

August 14, 2026

Speaker #1: Ladies and gentlemen, you are connected to Travel Food Services Limited Q1 FY27 earnings conference call. The call will begin shortly. I repeat, ladies and gentlemen, you are connected to Travel Food Services Limited Q1 FY27 earnings conference call.

Operator: Ladies and gentlemen, you are connected to Travel Food Services Limited Q1 FY27 earnings conference call. The call will begin shortly. I repeat. Ladies and gentlemen, you are connected to Travel Food Services Limited Q1 FY27 earnings conference call. The call will begin in 2 minutes. Thank you. Ladies and gentlemen, good day and welcome to the Q1 FY27 earnings conference call of Travel Food Services Limited, hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashutosh Jyoti Aditya. Thank you, and over to you, sir.

Speaker #1: The call will begin in two minutes. Thank you. Ladies and gentlemen, good day and welcome to the Q1 FY27 earnings conference call of Travel Food Services Limited, hosted by ICICI Securities Limited.

Operator: Ladies and gentlemen, good day and welcome to the Q1 FY27 earnings conference call of Travel Food Services Limited, hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashutosh Jyoti Aditya. Thank you, and over to you, sir.

Speaker #1: As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Speaker #1: Should you need assistance during the conference call, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note that this conference is being recorded.

Speaker #1: I now hand the conference over to Mr. Ashutosh Jyoti Aditya. Thank you, and over to you, sir.

Speaker #2: Yeah, thank you, Anushka. Hello and good afternoon, everyone present on the call. I, on behalf of ICICI Securities, welcome you to the Travel Food Services Limited Q1 FY27 earnings call.

Ashutosh Jyoti Aditya: Yeah. Thank you, Anushka. Hello, and good afternoon everyone present on the call. I, on behalf of ICICI Securities, welcome you on the Travel Food Services Limited Q1 FY27 earnings call. I would like to thank the management for giving us this opportunity of hosting the call. From the management, we have with us Mr. Varun Kapur, MD and CEO, Mr. Vikas Vinod Kapoor, whole-time director and CFO, and Ms. Chhavi Agarwal, Vice President, Investor Relations. I now hand the call over to Ms. Chhavi Agarwal for the opening remarks. Yeah. Thank you.

Ashutosh Joytiraditya: Yeah. Thank you, Anushka. Hello, and good afternoon everyone present on the call. I, on behalf of ICICI Securities, welcome you on the Travel Food Services Limited Q1 FY27 earnings call. I would like to thank the management for giving us this opportunity of hosting the call. From the management, we have with us Mr. Varun Kapur, MD and CEO, Mr. Vikas Vinod Kapoor, whole-time director and CFO, and Ms. Chhavi Agarwal, Vice President, Investor Relations. I now hand the call over to Ms. Chhavi Agarwal for the opening remarks. Yeah. Thank you.

Speaker #2: I would like to thank the management for giving me the opportunity to host this call. From the management, we have with us Mr. Varun Kapoor, MD and CEO; Mr. Vikas Vinod Kapoor, Whole-Time Director and CFO; and Ms. Chavi Agarwal, Vice President, Investor Relations.

Speaker #2: I now hand the call over to Ms. Chavi Agarwal for the opening remarks. Thank you.

Speaker #3: Thank you, Ashutosh, and good afternoon. Welcome, and thank you for joining us on the Travel Food Services Limited earnings conference call for the first quarter ended.

Chhavi Agarwal: Thank you, Ashutosh, and good afternoon. Welcome, and thank you for joining us on the Travel Food Services Limited earnings conference call for the first quarter ended 30 June 2026. The management will discuss the operational and financial performance for the quarter and address the question and answer session. We will be referring to the earnings presentation, press release, and the financial results uploaded on the stock exchanges. Before we proceed, here is a disclaimer to the call. A few statements by the company's management in the call can be forward-looking in nature, and we request you to refer to the disclaimer in the earnings presentation for further details. Now, I would like to hand over the call to Mr. Varun Kapur for opening remarks. Thank you.

Speaker #3: June 30, 2026. The management will discuss the operational and financial performance for the quarter, and address the question-and-answer session. We will be referring to the earnings presentation, press release, and the financial results uploaded on the stock exchanges.

Speaker #3: Before we proceed, here is a disclaimer for the call: A few statements by the company's management in the call may be forward-looking in nature, and we request you to refer to the disclaimer in the earnings presentation for further details.

Speaker #3: Now, I would like to hand over the call to Mr. Varun Kapoor for opening remarks. Thank you.

Speaker #4: Good afternoon, ladies and gentlemen, and thank you for joining us for the earnings call of TFS for the first quarter of this financial year.

Varun Kapur: Good afternoon, ladies and gentlemen, and thank you for joining us for the earnings call of TFS for the first quarter of this financial year. I hope you have had the opportunity to review our Q1 FY27 results and the investor presentation released yesterday. Let me begin with an update on the operating environment, followed by the key highlights of our performance, after which our CFO, Vikas, will take you through the financials in greater detail. We have begun the new financial year on a strong note. Despite the disruptions arising from the ongoing conflict in the Middle East, we delivered double-digit growth in both sales and profitability, continue to expand our network, and further strengthened our position across key airport markets. Let me start with the operating environment.

Speaker #4: I hope you have had the opportunity to review our Q1 FY27 results and the investor presentation released yesterday. Let me begin with an update on the operating environment.

Speaker #4: Following the key highlights of our performance, our CFO, Vikas, will take you through the financials in greater detail. We have begun the new financial year on a strong note.

Speaker #4: Despite the disruptions arising from the ongoing conflict in the Middle East, we delivered double-digit growth in both sales and profitability, continued to expand our network, and further strengthened our position across key airport markets.

Speaker #4: Let me start with the operating environment. Passenger traffic remains the single most important external driver of our business, and during the quarter, it was impacted by the Middle East conflict, particularly on international routes.

Varun Kapur: Passenger traffic remains the single most important external driver of our business, and during the quarter it was impacted by the Middle East conflict, particularly on international routes. Domestic traffic registered modest growth, but a significant decline in international traffic resulted in overall passenger traffic being broadly flat year on year for the quarter. For some added color, the quarter began with a decline in overall traffic in April. May saw a gradual stabilization in traffic trends as disruptions eased, with domestic traffic returning to growth while international traffic continued to face headwinds despite improving conditions. In June, traffic softened again following renewed conflict-related disruptions. That said, one of the clearest lessons of the past several years has been the resilience of travel demand. Time and again, we have seen passenger traffic and traveler spending rebound strongly once disruptions ease.

Varun Kapur: Passenger traffic remains the single most important external driver of our business, and during the quarter it was impacted by the Middle East conflict, particularly on international routes. Domestic traffic registered modest growth, but a significant decline in international traffic resulted in overall passenger traffic being broadly flat year-on-year for the quarter. For some added color, the quarter began with a decline in overall traffic in April. May saw a gradual stabilization in traffic trends as disruptions eased, with domestic traffic returning to growth while international traffic continued to face headwinds despite improving conditions. In June, traffic softened again following renewed conflict-related disruptions. That said, one of the clearest lessons of the past several years has been the resilience of travel demand. Time and again, we have seen passenger traffic and traveler spending rebound strongly once disruptions ease.

Speaker #4: Domestic traffic registered modest growth, but a significant decline in international traffic resulted in overall passenger traffic being broadly flat year-on-year for the quarter.

Speaker #4: For some added color, the quarter began with a decline in overall traffic in April. May saw a gradual stabilization in traffic trends as disruptions eased, with domestic traffic returning to growth, while international traffic continued to face headwinds despite improving conditions.

Speaker #4: In June, traffic softened again following renewed conflict-related disruptions. That said, one of the clearest lessons of the past several years has been the resilience of travel demand.

Speaker #4: Time and again, we have seen passenger traffic and traveler spending rebound strongly once disruptions ease. Even during the current quarter, the temporary easing of geopolitical tensions in May led to a sharp rebound in travel activity, particularly in domestic travel.

Varun Kapur: Even during the current quarter, the temporary easing of geopolitical tensions in May led to a sharp rebound in travel activity, particularly in domestic travel, resulting in the highest ever single month of domestic air traffic in India. Particularly notable against a softer base in the same month last year, and underscoring the resilience and strong bounce-back capability of the Indian travel market. Against this softer traffic backdrop, where we also saw higher costs and inflation pressures, TFS delivered another quarter of strong performance. System-wide sales grew by 18% year on year to INR 8.4 billion, while consolidated profit after tax increased by 35.6% year on year to INR 1.3 billion. Vikas will cover the financials in detail, so let me focus on what these numbers tell us about the business.

Varun Kapur: Even during the current quarter, the temporary easing of geopolitical tensions in May led to a sharp rebound in travel activity, particularly in domestic travel, resulting in the highest ever single month of domestic air traffic in India. Particularly notable against a softer base in the same month last year, and underscoring the resilience and strong bounce-back capability of the Indian travel market. Against this softer traffic backdrop, where we also saw higher costs and inflation pressures, TFS delivered another quarter of strong performance. System-wide sales grew by 18% year-on-year to INR 8.4 billion, while consolidated profit after tax increased by 35.6% year-on-year to INR 1.3 billion. Vikas will cover the financials in detail, so let me focus on what these numbers tell us about the business.

Speaker #4: Resulting in the highest ever single month of domestic air traffic in India, which is particularly notable against a softer base in the same month last year.

Speaker #4: And, underscoring the resilience and strong bounce-back capability of the Indian travel market. Against this softer traffic backdrop, where we also saw higher cost and inflation pressures, TFS delivered another quarter of strong performance.

Speaker #4: System-wide sales grew by 18% year on year to 8.4 billion rupees, while consolidated profit after tax increased by 35.6% year on year to 1.3 billion.

Speaker #4: Vikas will cover the financials in detail, so let me focus on what these numbers tell us about the business. We sustained strong momentum in new outlet openings, backed by recent contract wins and a robust pipeline, which translated into net contract gains of 15.9% year-on-year at a system-wide level.

Varun Kapur: We sustained strong momentum in new outlet openings, backed by recent contract wins and a robust pipeline, which translated into net contract gains of 15.9% year-on-year at a system-wide level. A few markets saw softer like-for-like performance during the quarter, notably Mumbai and Guwahati, owing to traffic migration to new airport infrastructure and certain southern India markets given their relatively higher exposure to Middle East traffic. As a result, system-wide LFL sales growth was 0.8% for the quarter. Importantly, excluding these specific markets, like-for-like sales grew around 7% year-on-year across our wider network. During the quarter, we commenced operations at Noida International Airport, taking our system-wide presence to 21 airports. Over the last 12 months, we have added 87 Travel QSR outlets and 2 lounges across the network, with significant additions at Mumbai, Delhi, Hyderabad, Cochin, Navi Mumbai, and Noida airports.

Speaker #4: A few markets saw softer like-for-like performance during the quarter, notably Mumbai and Guwahati, owing to traffic migration to new airport infrastructure, and some southern India markets, given their relatively higher exposure to Middle East traffic.

Speaker #4: As a result, system-wide LFL sales growth was 0.8% for the quarter. Importantly, excluding these specific markets, like-for-like sales grew around 7% year on year across our wider network.

Speaker #4: During the quarter, we commenced operations at Noida International Airport, taking our system-wide presence to 21 airports. Over the last 12 months, we have added 87 travel QSR outlets and 2 lounges across the network, with significant additions at Mumbai, Delhi, Hyderabad, Cochin, Navi Mumbai, and Noida airports.

Speaker #4: Our system-wide footprint as of the end of June stands at 580 travel QSR outlets and lounges, while our brand portfolio has expanded to 153 brands. We remain focused on creating a differentiated food and hospitality experience for travelers through a carefully curated portfolio of international brands, regional favorites, and our own in-house concepts.

Varun Kapur: Our system-wide footprint as of June end stands at 580 Travel QSR outlets and lounges, while our brand portfolio has expanded to 153 brands. We remain focused on creating a differentiated food and hospitality experience for travelers through a carefully curated portfolio of international brands, regional favorites, and our own in-house concepts. On the lounges side, we continue to see an encouraging response to our premium offerings and customer experience initiatives. We are also increasingly leveraging technology to deepen engagement with passengers and partners, while creating additional avenues for monetization. Another important milestone during the quarter was the successful launch of our passenger services at Noida International Airport under our Elite Assist brand, including meet and greet and porter services.

Speaker #4: On the lounges side, we continue to see an encouraging response to our premium offerings and customer experience initiatives. We are also increasingly leveraging technology to deepen engagement with passengers and partners, while creating additional avenues for monetization.

Speaker #4: Another important milestone during the quarter was the successful launch of our passenger services at Noida International Airport under our Elite Assist brand, including meet-and-greet and porter services.

Speaker #4: These offerings complement our existing lounge network and will integrate into our EATS technology platform, allowing passengers to use them alongside other experiences, further strengthening our ability to offer a comprehensive suite of airport hospitality and services.

Varun Kapur: These offerings complement our existing lounge network and will integrate into our EATS technology platform, allowing passengers to use them alongside other experiences, further strengthening our ability to offer a comprehensive suite of airport hospitality and services, and to enhance the passenger experience through a single connected ecosystem. Beyond the quarterly numbers, what excites us most is the scale of the performance we have built for future growth. Over the past year, we've expanded meaningfully across new airports and terminals, commissioning a large number of new outlets. Importantly, many of these assets are still in the early stages of ramp-up, which means a significant part of their earning potential is yet to be realized. As passenger traffic normalizes and builds, these units are positioned to contribute progressively and increasingly to our performance. The investment is already made, the capacity is in place, and we are ready.

Speaker #4: And, to enhance the passenger experience to a single connected ecosystem. Beyond the quarterly numbers, what excites us most is the scale of the performance we have built for future growth.

Speaker #4: Over the past year, we have expanded meaningfully across new airports and terminals, commissioning a large number of new outlets. Importantly, many of these assets are still in the early stages of ramp-up, which means a significant part of their earning potential is yet to be realized.

Speaker #4: As passenger traffic normalizes and builds, these units are positioned to contribute progressively and increasingly to our performance. The investment is already made, the capacity is in place, and we are ready.

Speaker #4: When traffic returns—and history tells us it will—TFS is well positioned to benefit from the network and groundwork we have put in place over the past 12 months.

Varun Kapur: When traffic returns, and history tells us it will, TFS is well-positioned to benefit from the network and groundwork we have put in place over the past 12 months. Looking ahead, several important growth catalysts are set to come online. The opening of Bhogapuram Airport on 17 August marks another significant milestone where we will operate multiple outlets under our JV, GHL. In parallel, we intend to progressively expand our passenger services platform to additional airports, building on the encouraging early response at Noida. We also have a strong pipeline of growth opportunities with over 50 outlets currently under development across our network. As these locations open and then mature over the coming 12 to 18 months, they are expected to provide a meaningful uplift to both revenue and earnings. The current environment reflects a temporary disruption.

Speaker #4: Looking ahead, several important growth catalysts are set to come online. The opening of Bogapuram Airport on 17 August marks another significant milestone, where we will operate multiple outlets under our JV, GHL.

Speaker #4: In parallel, we intend to progressively expand our passenger services platform to additional airports, building on the encouraging early response at Noida. We also have a strong pipeline of growth opportunities, with over 50 outlets currently under development across our network.

Speaker #4: As these locations open and then mature over the coming 12 to 18 months, they are expected to provide a meaningful uplift to both revenue and earnings.

Speaker #4: The current environment reflects a temporary disruption. The long-term drivers of Indian aviation remain firmly intact, supported by rising air travel penetration, expanding airport infrastructure, increasing connectivity, and a growing propensity to travel.

Varun Kapur: The long-term drivers of Indian aviation remain firmly intact, supported by rising air travel penetration, expanding airport infrastructure, increasing connectivity, and a growing propensity to travel. With a combination of network expansion, a robust pipeline of new units underway, expanding passenger service offerings, the effective and efficient use of technology, and a strong debt-free balance sheet, we believe TFS is better positioned than ever to capture the opportunities ahead and to continue creating long-term value for all our stakeholders. I am genuinely excited about the path ahead. With that, I will now hand over to Vikas, who will take you through our financial performance in greater detail.

Speaker #4: With a combination of network expansion, a robust pipeline of new units underway, expanding passenger service offerings, the effective and efficient use of technology, and a strong, debt-free balance sheet, we believe TFS is better positioned than ever to capture the opportunities ahead and to continue creating long-term value for all our stakeholders.

Speaker #4: I am genuinely excited about the path ahead. With that, I will now hand over to Vikas, who will take you through our financial performance in greater detail.

Speaker #2: Thank you, Varun, and good afternoon, everyone. I will now take you through the financial performance of the company for Q1 FY27. System-wide sales for the quarter reached $8.4 billion, representing a growth of 18% year-on-year.

Vikas Vinod Kapoor: Thank you, Varun, and good afternoon, everyone. I will now take you through the financial performance of the company for Q1 FY27. System-wide sales for the quarter reached INR 8.4 billion, representing a growth of 18% year on year. At a consolidated level, revenue from operations grew by 20.6% year on year to INR 4.5 billion. Consolidated like-for-like sales growth stood at 4.2%, while net contract gains remained strong at 20.2%, reflecting the contribution from recently commissioned units across Delhi, Cochin, Noida, and other key locations. Also, like-for-like sales growth was driven by menu innovations, promotional initiatives, and calibrated pricing. On the margin front, reported gross profit stood at INR 3.9 billion with a gross profit margin of 85.7%.

Vikas Vinod Kapoor: Thank you, Varun, and good afternoon, everyone. I will now take you through the financial performance of the company for Q1 FY27. System-wide sales for the quarter reached INR 8.4 billion, representing a growth of 18% year-on-year. At a consolidated level, revenue from operations grew by 20.6% year-on-year to INR 4.5 billion. Consolidated like-for-like sales growth stood at 4.2%, while net contract gains remained strong at 20.2%, reflecting the contribution from recently commissioned units across Delhi, Cochin, Noida, and other key locations. Also, like-for-like sales growth was driven by menu innovations, promotional initiatives, and calibrated pricing. On the margin front, reported gross profit stood at INR 3.9 billion with a gross profit margin of 85.7%.

Speaker #2: At a consolidated level, revenue from operations grew by 20.6% year on year, to $4.5 billion. Consolidated like-for-like sales growth stood at 4.2%, while net contract gains remained strong at 20.2%.

Speaker #2: Reflecting the contribution from recently commissioned units across Delhi, Cochin, Noida, and other key locations, like-for-like sales growth was also driven by menu innovations, promotional initiatives, and calibrated pricing.

Speaker #2: On the margin front, reported gross profit stood at $3.9 billion, with a gross profit margin of 85.7%. As highlighted in our presentation, gross profit margin reflects the accounting treatment of the lounge aggregation business, where revenues are recorded in sales while the related service costs are classified under other expenses.

Vikas Vinod Kapoor: As highlighted in our presentation, gross profit margin reflects the accounting treatment of the lounge aggregation business, where revenues are recorded in the sales while the related service costs are classified under other expenses. Adjusting for this reclassification of INR 223 million of lounge aggregation costs from other expenses to cost of sales, the adjusted gross profit stands at INR 3,655 million, translating into an adjusted gross profit margin of around 81%, which remains well within our guided range. Further, employee costs increased during the quarter, primarily due to annual compensation revisions and the onboarding of additional manpower to support recently opened outlets at Noida and Cochin airports, both of which are currently in the ramp-up phase. The increase also reflects staffing for the newly launched passenger services business at Noida Airport. Other expenses witnessed a similar trend driven by investments in these growth initiatives.

Speaker #2: Adjusting for this reclassification of ₹223 million of lounge aggregation costs from other expenses to cost of sales, the adjusted gross profit stands at ₹3.655 million.

Speaker #2: This translates into an adjusted gross profit margin of around 81%, which remains well within our guided range. Furthermore, employee costs increased during the quarter, primarily due to annual compensation revisions and the onboarding of additional manpower to support recently opened outlets at Noida and Cochin airports.

Speaker #2: Both of which are currently in the ramp-up phase. The increase also reflects staffing for the newly launched passenger services business at Noida Airport. Other expenses witnessed a similar trend, driven by investments in these growth initiatives.

Speaker #2: EBITDA stood at $1.6 billion, up 11% year-over-year, and EBITDA margin moderated to 35.8% for the quarter, reflecting the impact of higher employee costs and operating costs associated with recently commissioned airports and new business initiatives.

Vikas Vinod Kapoor: EBITDA stood at INR 1.6 billion, up 11% YOY, and EBITDA margin moderated to 35.8% for the quarter, reflecting the impact of higher employee costs and operating costs associated with recently commissioned airports and new business initiatives. These investments are strategic in nature, are aimed at supporting future growth and scaling up of the business. On the profitability front, our performance remains strong. Consolidated profit after tax increased by 35.6% year on year to INR 1.3 billion, and PAT margin expanded to 28.5%, compared with 25.3% in the corresponding quarter last year. The overall improvement in profitability was driven by continued sales growth despite flat passenger traffic, along with higher other income, which included a benefit of INR 131 million arising from write back of a GST provision following a favorable rectification order received by the company.

Vikas Vinod Kapoor: EBITDA stood at INR 1.6 billion, up 11% year-on-year, and EBITDA margin moderated to 35.8% for the quarter, reflecting the impact of higher employee costs and operating costs associated with recently commissioned airports and new business initiatives. These investments are strategic in nature, are aimed at supporting future growth and scaling up of the business. On the profitability front, our performance remains strong. Consolidated profit after tax increased by 35.6% year-on-year to INR 1.3 billion, and PAT margin expanded to 28.5%, compared with 25.3% in the corresponding quarter last year. The overall improvement in profitability was driven by continued sales growth despite flat passenger traffic, along with higher other income, which included a benefit of INR 131 million arising from write back of a GST provision following a favorable rectification order received by the company.

Speaker #2: These investments are strategic in nature and are aimed at supporting future growth and scaling up of the business. On the profitability front, our performance remains strong.

Speaker #2: Consolidated profit after tax increased by 35.6% year on year to ₹1.3 billion, and PAT margin expanded to 28.5% compared with 25.3% in the corresponding quarter last year.

Speaker #2: The overall improvement in profitability was driven by continued sales growth, despite flat passenger traffic, along with higher other income, which included a benefit of ₹131 million arising from ride-by-coffer GST provision, following a favorable rectification order received by the company.

Speaker #2: Our JV portfolio continues to ramp up and has also performed well across both domestic and international markets during the quarter, and is expected to benefit further as operating conditions improve and new units mobilize.

Vikas Vinod Kapoor: Our JV portfolio continues to ramp up and has also performed well across both domestic and international markets during the quarter. It is expected to benefit further as operating conditions improve and new units mobilize. Our balance sheet remains a significant source of strength. As of 30 June, we maintain a debt-free balance sheet and a consolidated cash balance of approximately INR 9.7 billion. This provides substantial headroom to fund airport expansions, lounge and highway growth opportunities, passenger services, and other strategic initiatives. Operating conditions continue to be influenced by external developments. We believe these factors are temporary in nature. The investments we have made across new airports, outlets, lounges, and passenger services are still in the early stages of ramp up, and provide a strong platform for future growth.

Speaker #2: Our balance sheet remains a significant source of strength. As of June 30th, we maintain a debt-free balance sheet and a consolidated cash balance of approximately $9.7 billion.

Speaker #2: This provides substantial headroom to fund airport expansions, lounge and highway growth opportunities, passenger services, and other strategic initiatives. Operating conditions continue to be influenced by external developments; we believe these factors are temporary in nature.

Speaker #2: The investments we have made across new airports, outlets, lounges, and passenger services are still in the early stages of ramp-up and provide a strong platform for future growth.

Speaker #2: Combined with our strong balance sheet, healthy cash position, disciplined approach to execution, and proven ability to navigate external headwinds, we believe TFS remains well-positioned to continue delivering sustainable growth and long-term value creation for all our stakeholders. With that, I would like to hand the call back to the operator and open the floor for questions.

Vikas Vinod Kapoor: Combined with our strong balance sheet, healthy cash position, disciplined approach to execution, and proven ability to navigate external headwinds, we believe TFS remains well-positioned to continue delivering sustainable growth and long-term value creation for all our stakeholders. With that, I would like to hand the call back to the operator and open the floor for questions.

Speaker #1: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star, then one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star, then two.

Operator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Akshay from ICICI Securities Limited. Please proceed.

Speaker #1: Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We will take the first question from Akshay at ICICI Securities Limited.

Speaker #1: Please proceed.

Speaker #3: Hi Varun and Vikas, kudos to the team. My first question is on passenger traffic. So, we had a flat base on the passenger side while the LFL still grew 4.2%.

[Analyst] (ICICI Securities): Hi Varun and Vikas. Kudos to the team. My first question is on the passenger traffic. We had a flat, based on the passenger traffic, while the LFL still grew 4.2%. I just wanted to understand how much of the LFL growth came from the higher spend per passenger versus other initiatives, and what is the sustainable trend or the sustainable level of the LFL growth as passenger traffic returns to normal growth?

Akshay Krishnan: Hi Varun and Vikas. Kudos to the team. My first question is on the passenger traffic. We had a flat, based on the passenger traffic, while the LFL still grew 4.2%. I just wanted to understand how much of the LFL growth came from the higher spend per passenger versus other initiatives, and what is the sustainable trend or the sustainable level of the LFL growth as passenger traffic returns to normal growth?

Speaker #3: I just wanted to understand how much of the LFL growth came from the higher spend per passenger versus other initiatives, and what is the sustainable trend, or the sustainable level, of the LFL growth with passenger traffic returning to normal growth?

Speaker #4: Okay, so thanks for your question. What we are seeing, I think, across the last few quarters as well, obviously, is that passenger traffic is a very important driver of, ultimately, the LFL growth that's there in the market.

Varun Kapur: Okay, to answer your question. What we have seen, I think across the last few quarters as well, always passenger traffic is a very important driver of ultimately the LFL growth that is there in the market. What we did see is during this period, as I mentioned, a very pronounced drop in passenger traffic, especially on the international side. While traffic was flat, largely because of May bounce back, that made the number flat. The other 2 months, we saw actually traffic dropping down, especially on the international side, and which are generally good spending consumers that come in there. With that, I mentioned when I was talking earlier, 0.8% was the system-wide number where LFL was there. But actually, if you remove some of those external effects to the markets that were more affected, you saw 7% LFL growth, for more the flattish markets.

Speaker #4: What we did see is, during this period, as I mentioned, there was a very pronounced drop in passenger traffic, especially on the international side. So while traffic was flat, largely because of a May bounce back, that kind of made the number flat.

Speaker #4: The other quarter, the other two months, we saw, actually, you know, traffic dropping down, especially on the international side, which are generally, you know, good-spending consumers that come in there.

Speaker #4: So with that, you know, with I mentioned in my when I was talking earlier, 0.8% was, you know, the system-wide number where LFL was there.

Speaker #4: But actually, if you remove some of those external effects for the markets that were more affected, you saw a 7% kind of LFL growth, you know, for more of the flattish markets.

Speaker #4: So, in a sense, if you see, we tend to be in that range of more than passenger traffic, you know, somewhere in the 5% to 7% above that, at least in terms of performance.

Varun Kapur: In a sense, if you see, we tend to be in that range of more than passenger traffic, somewhere in the 5% to 7% above that, at least in terms of performance. That's what last few quarters showed as well. As we expect passenger traffic to come back, as you're saying, that trend is what we expect to continue seeing going forward as passengers continue to spend, as more come through and many of these sectors come back, which were temporarily disrupted.

Speaker #4: And that's what the last few quarters have shown as well. So, as we expect passenger traffic to come back, as you're saying, that trend is what we expect to continue seeing going forward, as passengers continue to spend, and as more come through.

Speaker #4: And, you know, many of these sectors come back, which are temporary disruptions.

Speaker #3: But given the 4.2%, what will be the growth from the higher-spend passengers?

Speaker #4: So for the contribution—sorry—the percent relates to console. In terms of higher spend, see, the way it works out, it’s an approach, I think it’s a blend of different areas.

[Analyst] (ICICI Securities): But given the 4.2%, what will be the growth from the higher spend passengers?

Akshay Krishnan: But given the 4.2%, what will be the growth from the higher spend passengers?

Varun Kapur: So-

[Analyst] (ICICI Securities): For the quarter.

Akshay Krishnan: For the quarter.

Varun Kapur: Yes. Spend relates to console.

Speaker #4: So it would be wrong to look at what is a single perspective, because obviously there were effects where, you know, we have not been—for example, on price, we've not done a significant price escalation as well this year, you know, with the challenge around it.

Varun Kapur: That I am talking about. In terms of higher spend, see the way it works out, its approach, I think it is a blend of different areas. It would be wrong to look at what is a single aspect, because obviously there were effects where we have not been, for example, on price, we have not done a significant price escalation as well this year. With the dances around it, we have been a bit tempered in that. I think what has been there is that just in terms of normal initiatives that we have done around, we still kept that delta of around 5% to 7%. Combination is coming, no doubt, a part of it from price, but not as much. A part of it is coming from initiatives we would do around premiumizing, initiatives we would do around being bundled together.

Speaker #4: We've been a bit tempered in that as well. So I think what has been there is that just in terms of normal, you know, initiatives that we've done around, we still kept that delta of around 5% to 7%.

Speaker #4: So, a combination is—I mean, no doubt, a part of it is from price, but not as much. Part of it is coming from initiatives we would do around premiumizing, initiatives we would do around, you know, being bundled together.

Speaker #4: Also, in some cases—a few cases—brand edits or changes, limited cases. So all of those combined kind of get blended into that number.

Speaker #4: Of change.

Varun Kapur: Also, in some cases, a few cases, brand edits or changes in limited cases. All of those combined kind of get blended into that number of change.

Speaker #3: Got it, got it. My second question is on the economics of scale. So, over the next three to five years, what will improve the economics of TFS beyond passenger traffic growth?

Speaker #3: So, if you had to go in order of priority, would it be more about premiumization, higher spend per passenger, or better contract terms?

[Analyst] (ICICI Securities): Got it. My second is on the economics of scale. Over the next three to five years, what will improve the economics of TFS beyond the passenger traffic growth? If you have to go on a pecking order, will it be more on the premiumization or the higher spends per passenger, or better contract terms?

Akshay Krishnan: Got it. My second is on the economics of scale. Over the next three to five years, what will improve the economics of TFS beyond the passenger traffic growth? If you have to go on a pecking order, will it be more on the premiumization or the higher spends per passenger, or better contract terms?

Speaker #4: So I think the way our contracts work—and I think that's an important reference point to look at—is that when, you know, our model is that when you invest upfront, the nature of our contracts is that, in the early days of any contract, the numbers tend to take some time to hit normalization.

Varun Kapur: I think the way our contracts work, and I think that is an important reference point to look at, is when our model is that when we invest upfront, the nature of our contracts is that in the early days of any contract the numbers tend to take some time to hit normalization. That is because you can imagine, right, when you go into a new airport, you invest, it takes you that period, maybe 12 to 18 months for a running airport, maybe 24 months for a greenfield, because passenger traffic takes a bit of time. We also understand where gates are being used more, what type of brand works, some location has some challenges.

Speaker #4: And that's because, you can imagine, right, when you go into a new airport, you invest. It takes you that period—maybe 12 to 18 months for a running airport, maybe 24 months for a greenfield.

Speaker #4: Because passenger traffic takes a bit of time. We also understand where gates are being used more, what type of brand works. Some locations had some challenges.

[Analyst] (ICICI Securities): I know, sir.

Varun Kapur: That is because you can imagine, right, when you go into a new airport, you invest, it takes you that period, maybe 12 to 18 months for a running airport, maybe 24 months for a greenfield, because passenger traffic takes a bit of time. We also understand where gates are being used more, what type of brand works, some location has some challenges. All of that plays out. Sometimes we even change the brand at some point in time if it was not fitting in. All of that probably plays out over that 12 to 24-month horizon, depending on the nature of the terminal, right? A new terminal, like a Noida, Navi Mumbai, as you would see in the press, would take some time for traffic to pick up and that to normalize. Whereas running airports are a bit faster, right, where they are already there.

Speaker #4: So all of that plays out. Sometimes we even change the brand at some point in time if it was not fitting in. So, all of that probably plays out over that 12- to 24-month horizon, depending on the nature of the terminal, right?

Speaker #4: A new terminal, like in Noida or Navi Mumbai, as you would see in the press, would take some time for traffic to pick up and for that to normalize.

Varun Kapur: All of that plays out. Sometimes we even change the brand at some point in time if it was not fitting in. All of that probably plays out over that 12 to 24-month horizon, depending on the nature of the terminal, right? A new terminal, like a Noida, Navi Mumbai, as you would see in the press, would take some time for traffic to pick up and that to normalize. Whereas running airports are a bit faster, right, where they are already there.

Speaker #4: Whereas, running airports are a bit faster, right? Where they're already there. So, I think that combination is the way our numbers play out.

Speaker #4: So therefore, we're already always, as you saw, winning new contracts over the last year, which would be evident. We have quite a strong pipeline, so existing units that are there perform well.

Varun Kapur: I think that combination is the way our numbers play out. Therefore, we already always, as you saw, winning new contracts over the last year will be evident. We have quite a strong pipeline. Existing units that are there perform well. That is where economics improve. When obviously you have this bunch of new units come in. Yes, the last year we have had a strong pipeline of almost 90 units across Travel QSR and lounges come online. Quite a big pipeline, which I think is obviously for a short term, you have increased cost that plays out. But in the long term, there is a lot of firepower there that will unlock earnings potential as we go. As those units normalize over the next 12, 18, 24 months, those benefits will play out in our business.

Speaker #4: That's where economics improve. But obviously, you have this bunch of new units come, and yes, in the last year, we've had a strong pipeline of almost 90 units across travel, QSR, and lounges come online.

Speaker #4: So, quite a big pipeline, which I think is obviously, for the short term, you have an increased cost that plays out. But in the long term, you know, there's a lot of firepower there that will unlock earnings potential as we go, as those units normalize over the next 12, 18, 24 months.

Speaker #4: Those benefits would play out in our business.

Speaker #3: Perfect. Last question, if I may, on the capital allocation front and the balance sheet. So, we have a sizable, good balance sheet, and also given the current expansion opportunity...

[Analyst] (ICICI Securities): Perfect. Last question, may I? On the capital allocation front and the balance sheet. We have a sizable good balance sheet and also given the current expansion opportunity. How do you decide where to deploy capital? What I am looking is more importantly, what return threshold do you look for when bidding for a new airport or adding an outlet? What is the competitive bidding putting pressure on these returns expectations?

Akshay Krishnan: Perfect. Last question, may I? On the capital allocation front and the balance sheet. We have a sizable good balance sheet and also given the current expansion opportunity. How do you decide where to deploy capital? What I am looking is more importantly, what return threshold do you look for when bidding for a new airport or adding an outlet? What is the competitive bidding putting pressure on these returns expectations?

Speaker #3: Deploy capital? So what I'm looking for, more importantly, is what return threshold do you look for when bidding for a new airport or adding an outlet?

Speaker #3: And what about the competitive bidding? Is that putting pressure on these return expectations?

Speaker #4: So I will take that question. Vikas here. We are a cash-generating company, and a growing company at that. As we have clarified in the past as well, we are extremely prudent with our capital allocation strategy.

Vikas Vinod Kapoor: I will take that question. Vikas here. We are a cash-generating company and a growing company at that. Like we have clarified in the past as well, that we are extremely prudent with our capital allocation strategy. It is more driven by the units that we are currently in the phase of ramp-up. Over and above that, we constantly explore new opportunities that open up in airports which are on our target. In terms of that, the entire approach that we take is that we should be getting returns which, at a maturity level, mimic our rest of the portfolio from that perspective, and that is wherein our focus is at. We will not be changing growth unnecessarily unless and until it gives sustainable long-term profits for all our stakeholders.

Speaker #4: It's more driven by the units that we are currently in the phase of ramp-up. Over and above that, we constantly explore new opportunities that open up in airports, which are on our target list.

Speaker #4: In terms of that, the entire approach that we take is that we should be getting returns which, at a maturity level, mimic the rest of our portfolio from that perspective.

Speaker #4: And that's where our focus is. We won't be chasing growth unnecessarily, unless and until it delivers sustainable, long-term profits for all our stakeholders.

Speaker #3: Got it, got it. But I just wanted to understand the economics behind bidding, and also the opening of new outlets. So, what will be the maturity period, and also the operating leverage that you’ll be getting from here?

Speaker #4: So, like I mentioned, the maturity, in a sense—what happens is you start hitting normalized profit levels for an existing airport. So today, you know, it's an airport which is already running.

[Analyst] (ICICI Securities): Got it. I just wanted to understand the economics on bidding and also the opening of the new outlets. What will be the maturity period and also the operating leverage that you will be getting from here?

Akshay Krishnan: Got it. I just wanted to understand the economics on bidding and also the opening of the new outlets. What will be the maturity period and also the operating leverage that you will be getting from here?

Speaker #4: Say Delhi or Bangalore, existing terminals you come in, you take, say, 12 to 18 months to get because those are running. You understand it.

Varun Kapur: Like I mentioned, the maturity in a sense, what happens is you start hitting normalized profit levels for an existing airport. Today, it is an airport which is already running, say, a Delhi or a Bangalore, existing terminals. You come in, you take say, 12 to 18 months to get because those are running, you understand it, your teams get used to it. Any issues in operations side, production side, you get those streamlined. 12 to 18 months is normally the level we see. For a greenfield, which is a brand-new airport constructed from scratch, it goes into the 18 to 24-month type of horizon where you get to those normalized profit levels.

Speaker #4: Your teams get used to it. Any issues on the operations side, production side, you get those streamlined. Twelve to eighteen months is normally the level we see.

Speaker #4: For a greenfield, which is a brand-new airport constructed from scratch, it goes into the 18- to 24-month type of horizon, where you get to those normalized profit levels.

Speaker #4: And I think that's where, you know, I think TFS, you know, from a point of view in this sector, in terms of market leadership, I think the brands we bring the understanding of the sector, the larger investments on backend areas, we do enjoy, you know, I think significant strength in terms of get, you know, operating these contracts, winning these contracts.

Varun Kapur: I think that's where, I think TFS, from a point of view in this sector in terms of market leadership, I think the brands we bring, the understanding of the sector, the larger investments on back-end areas. We do enjoy I think significant strength in terms of operating these contracts, winning these contracts, running these contracts, which is where I think. That's why you kind of see the performance levels that come in. That is built on execution, which I think becomes a hallmark of our performance. That's why we can achieve these results, because of all those strengths which have been built up over multiple years, and experience, and with the teams that we have here who've done it for many, many airports, many outlets across the board.

Speaker #4: Running these contracts, which is where I think, and that's why you kind of see the performance levels that come in. You know, it's that discipline on execution.

Speaker #4: Which I think becomes a hallmark of our performance, and that's why we can achieve these results. Because of all those strengths, which have been built up over multiple years and experience, and with the teams that we have here who've done it for many, many airports, many outlets across the board.

Speaker #3: Thank you. Good luck, always.

Speaker #4: Thank you.

Speaker #1: Thank you. We’ll take the next question from Archel Kumar at HSBC. Please proceed.

[Analyst] (ICICI Securities): Thank you, and good luck on business.

Akshay Krishnan: Thank you, and good luck on business.

Varun Kapur: Thank you.

Speaker #3: Yeah, hi. Thanks for taking my question. My first question is on your guidance. As you mentioned, there are 50 outlets under development and you're expecting a meaningful uplift to the earnings.

[Analyst] (ICICI Securities): Thanks.

Operator: Thank you. We take the next question from the line of Achal Kumar from HSBC. Please proceed.

Speaker #3: So is that—I mean, that's on what time horizon you're talking about? Are you talking about Q2, or are you talking about a full year?

Achal Kumar: Yeah, hi. Thanks for taking my question. My first question is on your guidance. As such, you mentioned that 50 outlets under development and you are expecting meaningful uplift to the earnings. Is that, I mean, that is on what time horizon you are talking about? Are you talking about Q2? Are you talking about a full year? Can you please give a bit of color? Then when you say 50 outlets, is that total Travel QSR or are you adding some business lounges also?

Achal Kumar: Yeah, hi. Thanks for taking my question. My first question is on your guidance. As such, you mentioned that 50 outlets under development and you are expecting meaningful uplift to the earnings. Is that, I mean, that is on what time horizon you are talking about? Are you talking about Q2? Are you talking about a full-year? Can you please give a bit of color? Then when you say 50 outlets, is that total Travel QSR or are you adding some business lounges also?

Speaker #3: So, can you please provide a bit more color? And then, when you say 50 outlets, is that total QSRs, or are you including some business lounges as well?

Speaker #4: Hi, Archel. Thanks for your question. Varun here. There are two parts to that. First, just to give a bit of color around it—from an earnings potential point of view going forward, there are two aspects that play out.

Speaker #4: One, we have existing units that we built, say, over the last 12 months, which is roughly about 90 units we've already mobilized and activated.

Varun Kapur: I can answer your question. Varun, two parts to that. One, to just give a bit of color around it. I think from an earnings potential point of view going forward, there are two aspects at play out. One, we have existing units that we have built, say, over the last 12 months, which is roughly about 90 units we have already mobilized and activated. Some of them, which were in the early part of the year, are coming to normalization or maturity levels. A large part of those happened in the last two quarters. Those outlets will hit normalization over the next, say, 12 months approximately. That benefit, yes, will play out over the next 12 months. We see a kind of a double impact of that with traffic coming back as well, which has been a hallmark, I think, of the Indian aviation industry.

Speaker #4: Those, you know, some of them which were in the early part of the year are hitting the, little, you know, coming to normalization of maturity levels.

Speaker #4: A large part of those happened, you know, in the last two quarters. And those outlets will hit normalization over the next, say, 12 months, approximately.

Speaker #4: So that benefit, yes, will play out over the next 12 months. And we see a kind of a double impact of that, you know, with traffic coming back as well, which is, you know, been a hallmark I think of the Indian aviation industry has been growing strongly.

Speaker #4: So I think that's the expectation in the second half of the year. In terms of the 50 units we're referring to, those are more outlets we're actually constructing as we speak.

Speaker #4: So those are not even online. Those would come online, say, in this fiscal year. A large part of those is the plan—that they will open up.

Varun Kapur: It has been growing strongly. I think that is the expectation in the second half of the year. In terms of the 50 units you were referring to, those are more outlets we are actually constructing as we speak. Those are not even online. Those would come in online, say, in this fiscal year. A large part of those is the plan that they will open up. Some are being constructed, some are about to start construction. In a sense, that is the pipeline that we already have signed up. Once those mobilize, again, it will follow the same sort of scenario of 12 to 18 months for the ones that are in existing terminals. A little bit longer for the greenfield ones that are in new airports, like Noida, for example, we have a set of outlets coming up there, Navi Mumbai as well.

Speaker #4: Some are being constructed, some are about to start construction. So, in a sense, that's the pipeline that we already have signed up. And once those mobilize, again, it'll follow the same sort of scenario of 12 to 18 months for the ones that are in existing terminals.

Speaker #4: And it's a little bit longer for the greenfield ones that are in new airports. Like Noida, for example, we have a set of outlets coming up there.

Speaker #4: Now in Mumbai as well. So those take a little bit more time to normalize, with traffic coming in slowly in those airports, et cetera.

Speaker #4: So that's how we see it playing out.

Speaker #3: So sorry. So these 50 outlets that you're talking about—is it mainly at existing airports, right?

Varun Kapur: Those take a little bit more time to normalize, with traffic coming in slowly in those airports, et cetera. That is how we see it playing out.

Speaker #4: I saw you didn't catch that fully, Archel. Could you repeat that?

Achal Kumar: Sorry. This 50 outlets which you are talking about, it sits mainly on existing airports, right?

Speaker #3: So I said, so all these 50 units which you're talking about, which are under development, all these are on the existing airports. And could you—can you give a bit of color on which airports you're talking about?

Varun Kapur: Sorry, I did not catch that fully, Anju. Could you repeat that?

Speaker #3: Is it like Noida, Navi Mumbai, or is it also at the existing airports?

Achal Kumar: I said, all these 50 units which you are talking about, which are under development, all these are on the existing airports. Can you give a bit of color, and which airports are you talking about? Is it like Noida or Navi Mumbai, or is it on the existing airports also?

Speaker #4: So these 50 would be in airports we've already announced. These would be where awareness would be there. These are build-outs, which may have been won on contracts three, six, eight months ago.

Speaker #4: And build-outs are happening. So a good example would be outlets that are happening in, say, Delhi. But at the same time, it could be outlets happening in Navi Mumbai, where we've activated some already.

Varun Kapur: These 50 would be in airports we have already announced. These would be which awareness would be there. These are buildouts which may have been won on contracts three, six, eight months ago, and buildouts happening. A good example would be, it could be outlets that are happening in, say, Delhi. But at the same time, could be outlets happening in a Navi Mumbai, where we have activated some already, as well as some outlets happening in a Bhogapuram. So it is a blend of multiple airport outlets that are there, which are already secured by us, and we are basically in the process of mobilizing those outlets in these ones.

Speaker #4: As well as some outlets, say, happening in Bhogapuram. So, it's a blend of multiple airport outlets that are there, which are already secured by us.

Speaker #4: And we're basically in the process of mobilizing those outlets. In these ones.

Speaker #3: Okay, perfect. Second question is about the near term—in particular, the second quarter. I can see that the traffic is already down; domestic traffic is down 6%.

Speaker #3: International traffic is down about 4%. While in Q1, of course, the traffic was flat. But your major growth will come from the new contracts.

Achal Kumar: Okay, perfect. Second question is about the near term. Basically, the second quarter, I can see that the traffic is already down. The domestic traffic is down 6%, international traffic is down about 4%, while in Q1, of course, the traffic was flat, but your major growth came from the new contracts. How do you see the second quarter? We are standing in the middle of August, so you must have got very clear picture. Any color on the second quarter, please?

Speaker #3: How do you see the second quarter? We are standing in the middle of August, so you must have a very clear picture. Any color on the second quarter, please?

Speaker #4: So the second quarter, in a sense, while, you know, I'll try to give a limited capacity of traffic information that's visible in public now.

Speaker #4: So I think, in terms of what you're seeing out, and you would have seen a similar commentary across, I think it's very current. Until about August, it's a similar trend to Q1.

Varun Kapur: Well, the second quarter, in a sense, I will try to give you limited to passenger traffic information that is visible in public now. I think in terms of what you are seeing out there, and you would have seen a similar commentary across, I think currently, till about August, it is a similar trend to Q1. Traffic is around at similar levels is what we are seeing playing out. I think the rationale would be that international traffic, again, is where a bit of the delta sits. Again, that is the thing. But I think you may have got visibility because I think the airlines have all come out and mentioned particularly. If you saw, I think it was the month of May. Towards the end of May, two of the largest airlines here suspended a lot of international routes.

Speaker #4: Traffic is around at similar levels as what we are seeing, playing out. And I think the rationale would be that—so, international traffic again is where a bit of the delta sits, again.

Speaker #4: You know, that's the thing. But I think you may have got visibility, because I think the airlines have all come out and mentioned it particularly.

Speaker #4: So if you saw, I think it was the month of May—towards the end of May—many of, I mean, two of the largest airlines here suspended a lot of international routes.

Speaker #4: So if you remember earlier, there were quite a few international routes, especially long haul, right? Logically, with the way prices were, they were being suspended.

Speaker #4: I think they've already come out and said that you'll start seeing, from September into October, the restoration of many of those long-haul international routes.

Varun Kapur: A few happened earlier, and then as well, there were quite a few international routes, especially long haul, logically, with the fuel prices, where they were being suspended. I think they have already come out and called that you start seeing from September into October, restoration of many of those long-haul international routes. That is automatically where we expect to see that flow through. So the expectation is H2 of this year should be a good bounce back on passenger traffic. I think that has also been a call-out by many independent research that has been calling out what they expect passenger traffic this year in India to be a strong H2.

Speaker #4: And that's automatically where we expect to see that flow through. So the expectation is, H2 of this year should see a good bounce back in passenger traffic.

Speaker #4: And I think that's also been a callout by many independent research firms that have highlighted their expectation for passenger traffic in India this year to be strong in H2.

Speaker #3: Right, fair enough. And then finally, I also want to understand your plan on the international side. I think previously you mentioned that you're looking for growth in the international markets.

Speaker #3: Any thought on that, please?

Achal Kumar: Right. Fair enough. Finally, I also want to understand about your plan on the international side. I think previously you mentioned that you are looking for the growth in the international markets. Any thought on that, please?

Speaker #4: No, yes. No, completely. I can talk about that. So, as you know, we've had success in Malaysia, which we expanded post-COVID. Hong Kong as well—we went in.

Speaker #4: We won a second lounge in Hong Kong. We're present then January. We entered that business as well. Those are performing well, maturing. Again, like I said, ramp-up stage.

Varun Kapur: Yes, completely. I can talk about that. As you know, we have had success in Malaysia, which we expanded post-COVID. Hong Kong as well, we went in. We won a second lounge in Hong Kong. We are present there. In January, we entered that business as well. Those are performing well, maturing. Again, like I said, ramp-up stage happening on many of those units that have opened, say, in the last 2 years. But those are doing well for us. We are focused, which I had always called out, was look at the Middle East and Asia. I think just with the way situation is right now, I think Asia is a bit more of the focus until things in the Middle East normalize. We set up joint ventures. We had set up in Dubai earlier to focus at the Middle East.

Speaker #4: This is happening with many of those units that have opened, say, in the last two years. But those are doing well for us. We have—we are focused, which I’d always called out, was to look at the Middle East and Asia.

Speaker #4: I think, just with the way the situation is right now, Asia is a bit more of the focus until things in the Middle East normalize.

Speaker #4: We set up joint ventures. We had set up in Dubai earlier to focus on the Middle East. We had set up, not as joint ventures—sorry—an entity in Dubai to focus on the region.

Speaker #4: We set up another entity recently in Indonesia to look at opportunities there, because you need those local entities to be able to bid for opportunities in the markets.

Varun Kapur: We had set up another joint venture, sorry, an entity in Dubai to focus at the region. We set up another entity recently in Indonesia to look at opportunities there, because you need those local entities to be able to bid for opportunities in the markets. We are quite focused on that. We do see opportunity clearly coming up to bid for, pitch for in those markets, and we will be quite focused to take part in those opportunities. That is the plan, at least for the year as well.

Speaker #4: We are quite focused on that. We do see opportunities clearly coming up to bid for, pitch for, in those markets. And we will be quite focused to take part in those opportunities.

Speaker #4: And you know, that's the plan, at least for the year, as well.

Speaker #3: Okay, fair enough. So, sorry, last question on the cost side.

Speaker #2: Sorry to interrupt, Mr. Archel. I would request you to join back the Q1. There are several participants waiting for their turn.

Speaker #3: Sure.

Speaker #4: Yeah.

Speaker #2: Thank you. We will take the next question from the line of Purva from 361 Capital. Please proceed.

Achal Kumar: Okay, fair enough. Last question on the cost side-

Operator: Sorry to interrupt, Mr. Achal.

Achal Kumar: Yeah.

Operator: I would request you to join back the queue as there are several participants waiting for their turn.

Achal Kumar: Sure.

Speaker #5: Hi, thanks for the opportunity. So, my question was on the growth of associate and GV business. It was relatively measured compared to your console growth.

Operator: Thank you. We take the next question from the line of Purva from 361 Capital. Please proceed.

Speaker #5: But if I see Adani, FNBN lounge revenue, it has grown by 55% year-on-year. GHL, JMR reported in the presentation—reported by GHL.

[Analyst] (361 Capital): Hi, thanks for the opportunity. My question was on the growth of associate and JV business. It was relatively weaker compared to your console growth. If I see Adani F&B and lounge revenue, it has grown by 55% YOY. JMR reported in the presentation reported by GoHighLevel, it is around 22% YOY growth. What is the reason for our 15% growth in this associate and JV business?

Purva Zanwar: Hi, thanks for the opportunity. My question was on the growth of associate and JV business. It was relatively weaker compared to your console growth. If I see Adani F&B and lounge revenue, it has grown by 55% year-on-year. JMR reported in the presentation reported by GoHighLevel, it is around 22% year-on-year growth. What is the reason for our 15% growth in this associate and JV business?

Speaker #5: It's around 22% year-on-year growth. So, what's the reason for our 15% growth in this associate and JV business?

Speaker #4: So Purva, hi. This is Vikas here. In the case of the GV business, which is there, there are other players as well as in some of the markets where our GVs operate.

Speaker #4: And some of the units I have to move to us or the GV structure for a scheduled period of time, which we have clarified in the past as those contracts go over.

Varun Kapur: Purva, hi, this is Vikas here. In the case of the JV business, which is there are other players as well as in some of the markets where our JVs operate, and some of the units have to move to us or the JV structure over a scheduled period of time, which we have clarified in the past as those contracts go over. From that perspective, there would be definitely a mismatch between the growth trajectory of our JV models compared to the overall growth that could be experienced at some of our airport operator partners, number one. The second important fact is that a lot of the airports on the western side, which had Middle East as a strong market, have been impacted in terms of the passenger traffic as well as the overall sales. That forms a bulk of our JV portfolio from that perspective.

Vikas Vinod Kapoor: Purva, hi, this is Vikas here. In the case of the JV business, which is there are other players as well as in some of the markets where our JVs operate, and some of the units have to move to us or the JV structure over a scheduled period of time, which we have clarified in the past as those contracts go over. From that perspective, there would be definitely a mismatch between the growth trajectory of our JV models compared to the overall growth that could be experienced at some of our airport operator partners, number one. The second important fact is that a lot of the airports on the western side, which had Middle East as a strong market, have been impacted in terms of the passenger traffic as well as the overall sales. That forms a bulk of our JV portfolio from that perspective.

Speaker #4: From that perspective, there would definitely be a mismatch between the growth trajectory of our GV models compared to the overall growth that could be experienced at some of our airport operator partners, number one.

Speaker #4: The second important fact is that a lot of the airports on the western side which had the Middle East as a strong market have been impacted in terms of passenger traffic as well as overall sales cost.

Speaker #4: So that forms the bulk of our GV portfolio. From that perspective, that is where you see the gap in terms of our system-wide revenues versus the overall revenues.

Speaker #5: Got it. And secondly, are there any new upcoming airports that we are planning to bid for? And regarding the recent Bangalore contract that we won, how many outlets are we looking at there?

Varun Kapur: So that is where you see the gap in terms of our system-wide revenues versus the overall revenues.

Vikas Vinod Kapoor: So that is where you see the gap in terms of our system-wide revenues versus the overall revenues.

Operator: Okay, got it. Secondly, are there any new upcoming airports which we are planning to bid for? The recent Bangalore contract which we won, how many outlets are we looking at there?

Purva Zanwar: Okay, got it. Secondly, are there any new upcoming airports which we are planning to bid for? The recent Bangalore contract which we won, how many outlets are we looking at there?

Speaker #4: Yeah, Purva, hi. Varun here. So, one, to answer your question—the first part—I did talk a bit earlier about the international piece.

Speaker #4: So I won’t touch on that again because there we are looking at expansion, especially on the Asia opportunities. But in India, looking particularly in airports—so, Bangalore T1—we do see opportunity.

Varun Kapur: Yeah, Purva. Hi, Varun here. To answer your question, first part, I did talk about a bit earlier about the international piece, so I won't touch on that again because there we are looking at expansion, especially on the Asia opportunities. But in India, looking particularly in airports, so Bangalore T1, we do see opportunity. Yes, we did win one outlet, which is a very prominent outlet. For those of you flying through T1, you normally see a KFC. It's one of the busiest outlets there. So we won. We're doing a KFC in that airport. That's what we had called out. That was the first outlet part of Bangalore T1 is going through a massive upgradation plan. The airport's really creating something spectacular. So we do see a lot of opportunities coming up there, which we will bid for over the next 12 months.

Speaker #4: Yes, we did win one outlet, which is a very prominent outlet. For those of you flying through T1, you'd normally see a KFC—it's one of the busiest outlets there.

Speaker #4: So, we won. We're doing a KFC in that airport—that's what we had called out. That was the first set outlet. Part of Bangalore T1 is going through a massive upgradation plan.

Speaker #4: The airport is really creating something spectacular. So, we do see a lot of opportunities coming up there, which we will bid for over the next 12 months.

Speaker #4: Those will come up in phases; that's our expectation. Tier 2, a lot of airports are there as well. You know, part of that also—there are a few other AI airports coming up.

Speaker #4: For example, in the next two years, I think Pune is coming up. Again, it's one of the top 15. We're not there yet, so I think we have quite a bit of opportunity there.

Varun Kapur: Those will come up in phases. That's our expectation. Tier 2, a lot of airports are there as well. Part of that also, there's a few other AAI airports coming up, for example, being next 2 years, I think Pune is coming up. Again, it's one of the top 15 we're not there at. So I think that we have quite a bit of opportunity there. But aside from even airports, we are seeing even highways as an opportunity, which we are looking at. We're seeing that particularly with the wayside amenities plan that the government announced in the expressway rollout. We see that also as a medium-term to long-term plan, part of our strategy.

Speaker #4: But aside from even airports, we are seeing highways as an opportunity, which we are looking at. And we're seeing that particularly with the wayside amenities plan that the government announced in the expressway rollout.

Speaker #4: We see that also as a medium-term to long-term plan, as part of our strategy.

Speaker #5: Got it. That's it from my side. Thank you.

Speaker #4: Thank you.

Speaker #2: Thank you. We will take the next question from the line of Archel Pal from Monarch Network. Please proceed.

Operator: Got it. That is it from my side. Thank you.

Purva Zanwar: Got it. That is it from my side. Thank you.

Varun Kapur: Thank you.

Speaker #5: Yeah, hi. Thank you for the opportunity. So, my first question is: What is the sustainable LFL and net contract gain we are targeting to grow IOI?

Operator: Thank you. We will take the next question from the line of Achal Pal from Monarch Networth Capital. Please proceed.

Achal Pal: Yeah, hi. Thank you for the opportunity. My first question is on what is the sustainable LFL and net contract gain we are targeting to grow YOY?

Aachal Pal: Yeah, hi. Thank you for the opportunity. My first question is on what is the sustainable LFL and net contract gain we are targeting to grow year-on-year?

Speaker #4: Hi, Archel. Varun here. So, I think in terms of net contract gains, first of all, you know, I wouldn't call out a number because I think that depends on, right, what we win.

Speaker #4: It's been a while. Generally, we've seen quite good success, as you would have seen in our results, which we've always been calling out.

Varun Kapur: Hi, Achal. Varun here. I think in terms of net contract gains, first of all, I wouldn't call out a number because I think that depends year on year, what we win. While generally it's been, we've seen quite good success, as you would have seen our results, which we've always been calling out. Plus, in PARRVA, when we went for an IPO, we put those numbers out. So you've seen that being there year on year. But it's something which is a bit lumpy. Sometimes you win 30 outlets, sometime another 50 outlets, 20 outlets. So it's not exactly a more of a straight line. So it tends to be a bit lumpy, but we've been quite successful over the last few years in terms of our net contract gains. And currently we did about 16% system-wide.

Varun Kapur: Hi, Achal. Varun here. I think in terms of net contract gains, first of all, I wouldn't call out a number because I think that depends year-on-year, what we win. While generally it's been, we've seen quite good success, as you would have seen our results, which we've always been calling out. Plus, in PARRVA, when we went for an IPO, we put those numbers out. So you've seen that being there year-on-year. But it's something which is a bit lumpy. Sometimes you win 30 outlets, sometime another 50 outlets, 20 outlets. So it's not exactly a more of a straight line. So it tends to be a bit lumpy, but we've been quite successful over the last few years in terms of our net contract gains. And currently we did about 16% system-wide.

Speaker #4: Plus, you know, Padwa, when we went for an IPO, we put those numbers out. So you’ve seen that being consistent, I mean, year on year.

Speaker #4: But it's something which is a bit lumpy, right? Sometimes you win 30 outlets, sometimes another 50 outlets, or 20 outlets. So it's not exactly more of a straight line.

Speaker #4: So it tends to be a bit lumpy. But we've been quite successful over the last few years in terms of our net contract gains.

Speaker #4: And currently, we did about 16% system-wide. I think historically, we've kind of been in that ballpark with our numbers. In terms of LFL, what we see—and I think I mentioned in response to one of the earlier questions—the LFL tends to be largely impacted by passenger traffic as the single biggest external factor.

Varun Kapur: I think historically we've all kind of been in that ballpark with our numbers. In terms of LFL, what we've seen, I think I mentioned in one of the earlier questions, the LFL tends to be largely impacted by passenger traffic as the single biggest external factor. I think we've been quite consistent in terms of how we've been able to initiatives around price, around driving brand changes to all push LFL. So in that range of at least being 5% to 7% above passenger traffic. That's been the strength of our model, which normally in the high street is a bit of a challenge. We're used to passenger traffic somewhere around 8% to 9% in normal years. And we would drive maybe 5% to 7% more of LFL growth over that to kind of reach an LFL percentage, maybe around 14%, 15%.

Speaker #4: I think we've been quite consistent in terms of how we've been able to drive initiatives around price, around driving, you know, brand changes, to all push LFL.

Speaker #4: So you know, in that range of at least being 5% to 7% above passenger traffic. That's been the strength of our model, you know, which normally in the high street is a bit of a challenge.

Speaker #4: We've traditionally been where—I mean, we're used to passenger traffic somewhere around 8% to 9% in normal years. And you know, you drive maybe 5% to 7% more of LFL growth over that to kind of reach an LFL percentage maybe around 14% to 15%.

Speaker #4: That's been more of a normalized year. Obviously, in a year like this, where passenger traffic is flat, the idea is that LFLs would be about in that similar range to what we would normally see.

Speaker #4: The challenge is that some of the particular airports where the international traffic was strong this year—like I mentioned, the southern India markets—plus, you know, some of the terminal transfers this year, this quarter was a bit of an anomaly.

Varun Kapur: That's been a more of a normalized year. Obviously, a year like this where passenger traffic has been flat, the idea is LFLs would be about in that similar range is what we would normally see. Challenge being that some of the particular airports where the international traffic was strong this year, like I mentioned, the Southern India markets, plus some of the terminal transfers this year, this quarter was a bit of an anomaly, but that's how normally we look at LFL, which tends to be more passenger traffic, kind of the barometer linked to that.

Speaker #4: But that's how we normally look at LFL, which tends to be more of a passenger traffic kind of barometer linked to that.

Speaker #2: Okay, got it. So sir, this quarter we have seen an increase in other expenses by 540 bps. So what led to this increase, and how much are we targeting going forward?

Achal Pal: Okay, got it. Sir, this quarter we have seen an increase in other expense by 540 bps. So what needs to increase this, and how much we are targeting going forward?

Aachal Pal: Okay, got it. Sir, this quarter we have seen an increase in other expense by 540 bps. So what needs to increase this, and how much we are targeting going forward?

Speaker #4: So hi, this is Vikas here. The reason for higher other expenses in the quarter is, like I clarified even in my speech, there was roughly around $223 million of lounge aggregation cost, which has been classified in other expenses.

Vikas Vinod Kapoor: Hi, this is Vikas here. The reason for higher other expenses in the quarter is like I clarified, even in my speeches, there was roughly around INR 223 million of lounge aggregation cost, which has been classified in other expenses. As the business becomes meaningful, most likely we will show it as cost of sales separately. But excluding that also, the other expenses, while they have increased by 22% YOY, which is in line with the business growth. This is currently, as you are aware, that we are in the ramp-up stage of opening or mobilizing units in airports like Cochin, Delhi, as well as Noida. As part of that, there are higher pre-operating costs, which increases during this period, but it tends to normalize between the 12 to 18 months time frame.

Vikas Vinod Kapoor: Hi, this is Vikas here. The reason for higher other expenses in the quarter is like I clarified, even in my speeches, there was roughly around INR 223 million of lounge aggregation cost, which has been classified in other expenses. As the business becomes meaningful, most likely we will show it as cost of sales separately. But excluding that also, the other expenses, while they have increased by 22% year-on-year, which is in line with the business growth. This is currently, as you are aware, that we are in the ramp-up stage of opening or mobilizing units in airports like Cochin, Delhi, as well as Noida. As part of that, there are higher pre-operating costs, which increases during this period, but it tends to normalize between the 12 to 18 months time frame.

Speaker #4: As the business becomes meaningful, most likely we will show it as a cost of sales separately. But excluding that also, the other expenses, while they have increased by 22% year on year, are in line with the business growth.

Speaker #4: As you are aware, we are currently in the ramp-up stage of opening or mobilizing units in airports like Cochin, Delhi, as well as Noida.

Speaker #4: And as part of that, there are higher pre-operating costs, which increase during this period. But it tends to normalize within the 12- to 18-month time frame.

Speaker #4: From that perspective, we believe that we should be coming back to our original numbers, what we have been traditionally showing, within another 12 months or so, from that perspective.

Vikas Vinod Kapoor: From that perspective, we believe that we should be coming back to our original numbers, what we have been traditionally showing, within another 12 months or so, from that perspective.

Speaker #2: Okay. Okay. So one more—just a clarification that I need. So, Delhi T3, we have just for the first half, and in the second half, it is moving to JV, right?

Speaker #4: So, at this moment, the Delhi T3, which is a material subsidiary, the contract is still until 30th September 2026. The JV GHL has bid for the contract.

Achal Pal: Okay. Just a clarification that I need. Delhi T3 we have just for H1, and in the H2 it is moving to JV, right?

Aachal Pal: Okay. Just a clarification that I need. Delhi T3 we have just for H1, and in the H2 it is moving to JV, right?

Speaker #4: But the results are not out at this moment, so I can't comment on H2 as of now.

Vikas Vinod Kapoor: At this moment, the Delhi T3, which is a material subsidiary, the contract is till 30 September 2026. The JV GoHighLevel has bid for the contract, but the results are not out at this moment, so I can't comment on H2 as of now.

Speaker #5: Okay. And so which are the other airports that are coming up for renewal?

Speaker #4: So, like we had clarified in earlier calls as well, there would be Chennai and Calcutta airports, which would be coming at the end of March '27 and early Q1 of '27–'28.

Achal Pal: Okay. Which are the other airports which are coming for the renewal?

Aachal Pal: Okay. Which are the other airports which are coming for the renewal?

Vikas Vinod Kapoor: So, like we had clarified in earlier calls as well, there would be Chennai and Kolkata airports, which would be coming at the end of March 2027 and early Q1 of 2027/2028, for renewal purposes.

Speaker #4: For renewal purposes.

Speaker #5: Okay. Okay. Okay. Thank you. That's it from my side.

Speaker #2: Thank you. We take the next question from the line of Naveen from I Thought PMS. Please proceed.

Achal Pal: Okay. Thank you. That's it from my side.

Aachal Pal: Okay. Thank you. That's it from my side.

Speaker #6: Good morning, team. Congratulations on the 200 numbers, and thank you for taking my question. So, moving forward, my understanding is that the JV business will predominantly come from, you know, the airports that are managed by our JV partners in India—GMR, you know, and other operators.

Operator: Thank you. We take the next question from the line of Naveen from ITUS Capital PMS. Please proceed.

[Company Representative] (ITUS Capital): Good morning, team. Congratulations on a good set of numbers, and thank you for taking my question. Moving forward, my understanding is that the JV business will predominantly come from the airports that are managed by our JV partners, Adani, and other operators. I am more concerned about the non-JV business on the console level. Could you just maybe comment on the contract gains and the quality of contract gains in these airports and your general expectations of how that market will evolve? Will we see a discrepancy between our JV entities and the console business? One of my main concerns is to do with the profit share. The JV profit share is significantly lesser than the console business. We just want to qualitatively understand the difference between these two businesses.

Navin Koushik: Good morning, team. Congratulations on a good set of numbers, and thank you for taking my question. Moving forward, my understanding is that the JV business will predominantly come from the airports that are managed by our JV partners, Adani, and other operators. I am more concerned about the non-JV business on the console level. Could you just maybe comment on the contract gains and the quality of contract gains in these airports and your general expectations of how that market will evolve? Will we see a discrepancy between our JV entities and the console business? One of my main concerns is to do with the profit share. The JV profit share is significantly lesser than the console business. We just want to qualitatively understand the difference between these two businesses.

Speaker #6: But I'm more concerned about the non-JV business, right? On the console level. So could you just maybe comment on the contract gains and the quality of contract gains in these airports, and your general expectations of how that market will evolve?

Speaker #6: Like, will we see a discrepancy between JV entities and the console business? One of my main concerns is to do with the profit share, right?

Speaker #6: So, the JV profit share is significantly less than the console business. I just want to qualitatively understand the difference between these two businesses.

Speaker #4: Yeah, hi Naveen. No, thanks for the wishes. So, just to clarify, our JVs are not only the ones you mentioned here in India, but also we have a significant portion of JVs in our Malaysia business. Our international business is also a JV.

Varun Kapur: Yeah, hi, Naveen. Thanks for the wishes. In terms of one thing just to clarify, our JVs are not only the ones you mentioned here in India, but also we have a significant portion with JVs. Our Malaysia business, international business is also the JV. So it is a broader set of joint venture business that you see in our numbers. But in terms of how the JV businesses and the business on, say, the non-JV that we have here. To give a perspective, like this year, which we had won earlier during the year and announced at different times. Cochin, for example, was the one we picked up directly. Another one, which we mobilized currently in this month, a part of our earnings presentation was Noida Airport as well, that we are mobilizing a few units still to mobilize a set of units.

Speaker #4: So, it's a broader set of joint venture businesses that you see in our numbers. But in terms of how the JV businesses and the business on, say, the non-JV that we have here—so, to give a perspective, like this year, which we had one earlier during the year, announced at different times.

Speaker #4: So, Cochin, for example, was one we picked up directly. Another one, which we mobilized currently this month as part of our earnings presentation, was Noida airport.

Speaker #4: As well, we are mobilizing a few units, still to mobilize a set of units. So there have been quite a bit of openings there as well.

Speaker #4: And Bangalore, we spoke about there as well. We picked up a unit in T1, and we see quite a bit of opportunity coming there as well.

Speaker #4: So I think the way we look at it is, there are two clear drivers of the business, even in the Indian market—aside from the international opportunity.

Varun Kapur: There has been quite a bit of openings there as well. Bangalore, we spoke about there as well. We picked up a unit in T1, and we see quite a bit of opportunity coming there as well. I think the way we look at it is there are two clear drivers of the business, even in the Indian market, aside from even the international opportunity, where we have these two opportunities of growing both through joint ventures with partners we work closely with. At the same time, we have a large part of the airports where we work with, which could be a combination of private owned, which could be a combination of run by AAI, which also is a large opportunity. In terms of growth, very similar drivers for both. Ultimately, we are operating these businesses.

Speaker #4: Where we have kind of these two opportunities of growing both through joint ventures with partners we work closely with. And at the same time, we have a large part of the airports, you know, where we work with, which could be a combination of private-owned, which could be a combination of run by AI, which also is a large opportunity.

Speaker #4: And in terms of growth, very similar drivers for both. You know, ultimately, we are operating these businesses, and very similar drivers because in terms of passenger traffic, it tends to be—obviously you have some nuances, like what happened this quarter with sudden markets logically being more affected for international traffic to the Middle East.

Speaker #4: But largely, you know, the growth has been quite democratic across India in air traffic. So you've seen strong growth across whether JV, non-JV, large, or small airports.

Varun Kapur: And very similar drivers because in terms of passenger traffic, it tends to be obviously you have some nuances like what happened this quarter with certain markets logically being more affected for international traffic to the Middle East. But largely, the growth has been quite democratic across India in air traffic. So you have seen strong growth across whether JV, non-JV, large, small airports. They have been quite robust and balanced growth across all. Therefore, we see these two avenues actually growing hand in hand during normalized periods.

Speaker #4: There's been quite robust and balanced growth across all. Therefore, we see these two avenues actually growing hand in hand during normalized periods.

Speaker #6: Okay, just a small follow-up before I move to my last trend question. So, my understanding about the industry as a whole, globally and in India, is that—

Speaker #6: The standard operating model, whenever there's a private player involved, is through a JV, right? So, I just want your thoughts on whether we see the console business shrinking and the JV taking up a bigger chunk of the business or not.

[Company Representative] (ITUS Capital): Okay. Just a small follow-up before I move to my last trend question. My understanding about the industry as a whole, globally and in India, is that the standard operating model whenever there is a private player involved is through a JV, right? Just want your thoughts on whether we see the console business shrinking and the JV taking up a bigger chunk of the business or not, is what I was trying to get some clarity on.

Navin Koushik: Okay. Just a small follow-up before I move to my last trend question. My understanding about the industry as a whole, globally and in India, is that the standard operating model whenever there is a private player involved is through a JV, right? Just want your thoughts on whether we see the console business shrinking and the JV taking up a bigger chunk of the business or not, is what I was trying to get some clarity on.

Speaker #6: It was part of trying to get some clarity on this.

Speaker #4: Yeah, so actually, just to correct that, the information would be incorrect where you would have got it from. Because the majority of airports work directly, where JVs are—probably what you were referring to is where multi-airport operators.

Varun Kapur: Yeah. Actually, just to correct it, that information would be incorrect where you would have got it from, because the majority of airports work directly where JVs are probably what you were referring to is where multi-airport operators.

Speaker #4: So, a JV generally works where someone is running multiple airports. You know, it makes sense for them to have a partner across this multiple because, you know, the effort of putting a JV in, running it, the cost with that of a separate individual vehicle, with a set, makes sense when you're running multiple airports.

Vikas Vinod Kapoor: A JV generally works where someone is running multiple airports. It would make sense for them to have a partner across these multiple because the effort of putting a JV in, running it, the cost for that of a separate individual vehicle with a set, makes sense when you are running multiple airports. When you have a single airport, those efficiencies don't play out in the same manner. Globally, more often than not by a wide margin, direct concessions is the norm. JVs tend to be in these type of examples where you have, say, an operator maybe running 5, 6, 7 airports, and that's where we've seen this globally as well, more often than not. Maybe one or two exceptions, but largely, that's how the model, what we've seen in our experience.

Varun Kapur: A JV generally works where someone is running multiple airports. It would make sense for them to have a partner across these multiple because the effort of putting a JV in, running it, the cost for that of a separate individual vehicle with a set, makes sense when you are running multiple airports. When you have a single airport, those efficiencies don't play out in the same manner. Globally, more often than not by a wide margin, direct concessions is the norm. JVs tend to be in these type of examples where you have, say, an operator maybe running 5, 6, 7 airports, and that's where we've seen this globally as well, more often than not. Maybe one or two exceptions, but largely, that's how the model, what we've seen in our experience.

Speaker #4: You know, when you have a single airport, those efficiencies don't play out in the same manner. So globally, more often than not, by a wide margin, direct concessions are the norm.

Speaker #4: JVs tend to be in these types of examples where, say, you have an operator who may be running five, six, or seven airports. That's where we see, globally as well, more often than not.

Speaker #4: There may be one or two exceptions, but largely, that's how the model is, from what we've seen in our experience.

Speaker #6: Got it. So my next question is just on a bookkeeping level only—just a small question. So, between the gross level and the, you know, operating level, there's around 45 to 50 percent of sales as costs, right?

[Company Representative] (ITUS Capital): Got it. My next question is like on a bookkeeping level only. It's a small question. Between the gross level and the operating level, there is around 45% to 50% of sales is cost, right? Just want to understand how much of this is fixed and how much of this is variable, because I feel like both the other expenses and the employee line item have both variable and fixed components, right? Just want to understand what percent of cost will be fixed. Basically trying to understand how operating leverage might play out in this business.

Navin Koushik: Got it. My next question is like on a bookkeeping level only. It's a small question. Between the gross level and the operating level, there is around 45% to 50% of sales is cost, right? Just want to understand how much of this is fixed and how much of this is variable, because I feel like both the other expenses and the employee line item have both variable and fixed components, right? Just want to understand what percent of cost will be fixed. Basically trying to understand how operating leverage might play out in this business.

Speaker #6: So, just want to understand how much of this is fixed and how much of this is variable. Because I feel like both the other expenses and the employee line item have both variable and fixed components, right?

Speaker #6: So, I just want to understand what percent of costs would be fixed. Basically, I'm trying to understand how operating leverage might play out in this business.

Speaker #4: So, by default, roughly around 8 to 10 percent of our cost tends to be fixed because, in terms of occupancy cost, you have these CAM charges and other charges which are levied by airport operators, which are fixed in nature.

Speaker #4: We have complete visibility into how they grow or ramp up over the course of the contract. Further to that, there are only a limited number of fixed costs per se.

Vikas Vinod Kapoor: By default, roughly 8% to 10% of our cost tends to be fixed, because in terms of occupancy cost, you have these CAM charges and other charges which are levied by airport operators, which are fixed in nature, which we have complete visibility how they grow or ramp up over the course of the contract. Further to that, there are only a limited amount of fixed costs per se. Labor is semi-variable in the sense because India as a market is a fixed wage market from that perspective. But where the economies of scale for a player like us step in is, our size and scale at existing airports, wherein we are able to bring in efficiencies in back of the house.

Speaker #4: Labor is semi-variable, in the sense that India as a market has a fixed wage structure from that perspective. But where the economies of scale for a player like us step in is our size and scale at existing airports, wherein we are able to bring in efficiencies in the back of the house.

Speaker #4: Be it stores, be it in terms of procurement strategies, be it in terms of, if suddenly international traffic is impacted, we can move our staff or manpower from international to the domestic side of the terminal.

Vikas Vinod Kapoor: Be it stores, be it in terms of procurement strategies, be it in terms of that if suddenly international traffic is impacted, we can move our staff or manpower from international to the domestic side of the terminal. Those are the leverages that we tend to enjoy in terms of bringing the required economies of scale.

Speaker #4: Those are the leverages that we tend to enjoy in terms of bringing the required economies of scale.

Speaker #6: So, very clear qualitatively, but just a small follow-up quantitatively. Out of this fixed— I mean, this 50 percent cost base— how much will grow, you know, detached from the growth of the business, and how much is tied to the growth of the business?

[Company Representative] (ITUS Capital): Very clear qualitatively. Just a small follow-up quantitatively. Out of this 50% cost base, how much will grow detached from the growth of the business and how much is tied to the growth of the business?

Navin Koushik: Very clear qualitatively. Just a small follow-up quantitatively. Out of this 50% cost base, how much will grow detached from the growth of the business and how much is tied to the growth of the business?

Speaker #4: That is actually quite variable depending on year-on-year, to be fair. Because what happens is, in some years wherein you have a ramp-up in the cost, your variable cost would go up because you would have a higher pre-operating cost expense base, which would come in.

Vikas Vinod Kapoor: That is actually quite variable depending on year-on-year, to be fair, because what happens is in some years wherein you have a ramp-up in the cost, your variable cost would go up because you would have higher pre-operating cost expense base, which would come in. As I said, the limited fixed amount would be more in terms of your occupancy and a certain amount of manpower that you require to ensure that operations are running in the way that is expected.

Speaker #4: And like I said, the limited fixed amount would be more in terms of your occupancy and a certain amount of manpower that you require to ensure that operations are running in the way that is expected.

Speaker #6: Gotcha. Thanks a lot for the clarification.

Speaker #1: Thank you. We will take the next question from the line of Sumant Kumar from Motilal Oswal. Please proceed.

[Company Representative] (ITUS Capital): Got it, sir. Thanks a lot for the clarifications.

Navin Koushik: Got it, sir. Thanks a lot for the clarifications.

Speaker #3: Yeah. My question is, a couple of airports are going to expire and considering the cost is going to increase. So, how are we going to retain the margin of that airport?

Operator: Thank you. We take the next question from the line of Sumant Kumar from Motilal Oswal. Please proceed.

Sumant Kumar: Yeah. My question is, a couple of the airport are going to expire, and considering the cost is going to increase, so how are we going to retain the margin of that airport?

Speaker #4: As well. So I think the cost increase which you're mentioning, I think from relates more to when a new contract starts. So as these because we've had a lot of new build, the cost increase actually plays out at that point in time.

Vikas Vinod Kapoor: Hi, Sumanth. I think the cost increase which you are mentioning, I think relates more to when a new contract starts. Because we have had a lot of new build, the cost increase actually plays out at that point in time. So when we start these new units, you will have this cost increase, and especially in a greenfield, probably plays out more, because in a greenfield airport, passenger traffic takes a bit of time to come. So prime example being Noida Airport starting. We have teams there providing the services. You have pre-operating costs because those teams need to come in advance before sales are even there, right? They have to go for training. For many of the brands, even two, three months of training in advance. Leadership teams going in, travel, various pre-operating expenses. So those tend to be quite larger.

Varun Kapur: Hi, Sumanth. I think the cost increase which you are mentioning, I think relates more to when a new contract starts. Because we have had a lot of new build, the cost increase actually plays out at that point in time. So when we start these new units, you will have this cost increase, and especially in a greenfield, probably plays out more, because in a greenfield airport, passenger traffic takes a bit of time to come. So prime example being Noida Airport starting. We have teams there providing the services. You have pre-operating costs because those teams need to come in advance before sales are even there, right? They have to go for training. For many of the brands, even two, three months of training in advance. Leadership teams going in, travel, various pre-operating expenses. So those tend to be quite larger.

Speaker #4: So, it would be less about—so, when we start these new units, you'd have this cost increase because—and especially in a greenfield, it probably plays out more, because in a greenfield airport, passenger traffic takes a bit of time to come.

Speaker #4: So, like, a prime example being Noida airport started—we have teams there providing the services. You know, you have pre-operating costs, because those teams need to come in advance before sales are even there, right?

Speaker #4: They have to go for training. For many of the brands, even two to three months of training in advance. You know, leadership teams going in, travel, various pre-operating expenses.

Speaker #4: So those tend to be quite larger. And yes, we've been through, in a positive sense, a strong new net gain—new opening cycle. So that has played out in the cost, which will be, basically, our earnings potential for the period ahead.

Speaker #4: It unlocks that. At the same time, to your question—when things go for expiry and they get renewed—yes, there will logically be some cost escalation again at that point in time, because there would be new brands which change.

Vikas Vinod Kapoor: And yes, we have been through, in a positive sense, a strong new net gain, new opening cycle. So that has played out in the cost, which will be basically our earnings potential for the period ahead. It unlocks that. At the same time, to your question that when things go for expiry and they get renewed, yes, there will logically be some cost escalation again at that point in time, because there would be new brands which change. In renewals, the changes you do may be more limited than a brand in a fresh construction. But yes, you would still have some brand changes, what is relevant there, some attitude refresh. So there would be some level of reset and some level of cost sitting in. But that again would normalize probably on the lower end of that 12-month scenario is the way we see it playing out.

Varun Kapur: And yes, we have been through, in a positive sense, a strong new net gain, new opening cycle. So that has played out in the cost, which will be basically our earnings potential for the period ahead. It unlocks that. At the same time, to your question that when things go for expiry and they get renewed, yes, there will logically be some cost escalation again at that point in time, because there would be new brands which change. In renewals, the changes you do may be more limited than a brand in a fresh construction. But yes, you would still have some brand changes, what is relevant there, some attitude refresh. So there would be some level of reset and some level of cost sitting in. But that again would normalize probably on the lower end of that 12-month scenario is the way we see it playing out.

Speaker #4: Now, yes, in renewals, the changes you do may be more limited than a brand, I mean, a fresh construction. But yes, you'd still have some brand changes; what's relevant there.

Speaker #4: Some assets you would refresh, so there would be some level of reset and some level of cost sitting in. But that, again, would probably normalize—probably on the lower end of that 12-month scenario—is the way we see it playing out.

Speaker #3: When we talk about this, this time we have top-line growth of 20 percent plus and EBITDA growth of 11 percent. So, our more than 9 percent margin has gone down because of higher employee cost and other expenses due to the commissioning of the new site.

Sumant Kumar: When we talk about this, that this time we have a top-line growth of 20% plus and EBITDA growth of 11%. So our more than 9% margin has gone because of higher employee cost and other expenses because of commissioning of new sites. Is that big impact because of Noida or any other places?

Speaker #3: So, is that big impact because of Noida or any other places?

Speaker #4: So we had mobilization in Noida. We had mobilization in Cochin as well. So we had two airports that came in place at once in the year, plus we had a lot of new units coming in line in Delhi as well.

Vikas Vinod Kapoor: We had mobilization in Noida. We had mobilization in Cochin as well. So we had two airports that came in place at once in here. Plus, we had a lot of new units coming online in Delhi as well, in new terminals that were there. For example, we had presence in Delhi Airport, but with the set of new outlets. So it is a combination of when a greenfield happens, it is much larger because we had a full set of teams. But even in existing terminal, when you have a large set of outlets coming in.

Varun Kapur: We had mobilization in Noida. We had mobilization in Cochin as well. So we had two airports that came in place at once in here. Plus, we had a lot of new units coming online in Delhi as well, in new terminals that were there. For example, we had presence in Delhi Airport, but with the set of new outlets. So it is a combination of when a greenfield happens, it is much larger because we had a full set of teams. But even in existing terminal, when you have a large set of outlets coming in.

Speaker #4: And new terminals that were there. So, for example, we already had a presence in some of the terminals. We had a presence in Delhi Airport, but with the set of new outlets...

Speaker #4: So it's a combination that when a greenfield happens, it is much larger because we have a full set of teams. But even in an existing terminal, when you have a large set of outlets coming in, the teams for those outlets, for example, you need to recruit in advance and train for those outlets.

Speaker #4: Now, if it's one, two outlets here, there, it gets subsumed in numbers. But when you have a large opening cycle, that plays out. That tends to be quite how do you say that tends to bunch up and get a number like you'd say an impact on the EBITDA as we had.

Varun Kapur: The teams for those outlets, for example, you need to recruit in advance and train for those outlets. If it is one, two outlets here and there, it gets subsumed in numbers. But when you have a large opening cycle that plays out, that tends to be quite, how to say that, tends to bunch up and get a number like you would see an impact on the EBITDA as we had. So that obviously has played out in our numbers as well.

Speaker #4: So, that obviously has played out in our numbers as well.

Speaker #3: Regarding the impact of inflation, due to changing labor costs or labor codes and other expenses that have increased, can you provide any further bifurcation?

Speaker #3: Can you tell us, apart from that, what other factors caused the other expenses to increase significantly?

Sumant Kumar: Indeed. Listen, in fact, because of changing labor cost or labor code and also other expenses increase, any other bifurcation can you do that? Can you tell us what are the other factor apart from that, the other expense increased significantly?

Speaker #4: So, on the other expenses, the labor code—we roughly have around 5,000 plus employees, and the majority are on company roll. The impact of the new labor code is very minimal for us, which we had clarified earlier.

Vikas Vinod Kapoor: So on the other expenses, the labor code, we roughly have around 5,000 plus employees, and majority are on company roll. The impact of the new labor code is very minimal for us, which we had clarified earlier, and it was below INR 8 to 10 crore kind of a number from that perspective, which we have clarified. Other than that, there isn't any other jump up in the cost except annual increments and the higher pre-operating cost for the ramp-up of units that happened for Cochin, Noida, as well as Delhi units, which we are in the process of commissioning or ramping up as we go along. So it will equate or be in line over a period of time as those units start performing.

Speaker #4: And it was below, like 8 to 10 crore, kind of a number from that perspective, which we had clarified. Other than that, there isn't any other jump up in the cost, except annual increments and the higher pre-operating cost for the ramp-up of units that happened for Cochin.

Speaker #4: Noida as well as Delhi units, which we are in the process of commissioning or ramping up as we go along. So it will equate or be in line over a period of time as those units start performing.

Speaker #3: Okay. Okay. Thank you so much.

Speaker #1: Thank you. We will take the next question from the line of Sanjay Ladha from Bastion Research. Please proceed.

Sumant Kumar: Okay. Thank you so much.

Speaker #5: Hi, thank you for the opportunity, and congratulations on the great set of numbers. Sir, I just wanted to know—we see a small moderation in our contract renewal rate.

Varun Kapur: Thank you.

Operator: Thank you. We take the next question from the line of Sanjay Ladha from Bastion Research. Please proceed.

Speaker #5: It used to be approximately 94 percent, and now it's trending around 92 percent. So, is this just an adjustment made for Delhi Terminal Three, or have any of the concessions expired which we did not renew?

Sanjay Ladha: Sir, hi, sir. Thank you for the opportunity and congratulations on a great set of numbers. Sir, I just wanted to know, we see a small moderation in our contract renewal rate. It used to be approximately 94%, and now it stands around 92%. Is this just an adjustment made for Delhi Terminal 3, or has any of the concession expired which we did not renew?

Speaker #4: Yeah. Hi, Sanjay. Thanks again. So, in terms of that number, if I recollect, I'm just trying to put—while, you know, it probably was nothing material in there.

Speaker #4: But if I remember right, it was some highway outlets with the Padwa strategy, which we had entered earlier, where we didn't see an intention to renew.

Varun Kapur: Yeah. Hi, Sanjay. Thanks again. In terms of that number, if I recollect, just trying to put while it probably was nothing material in there. If I remember right, it was some highway outlets, which part of our strategy, which was something we entered earlier, which we didn't see an intention to renew. Because our strategy is now to go with the WSA larger investments. We had done a few pilots in the highway, a bit of smaller size. So those outlets we didn't look at renewing. I think that's why you've seen that marginal moving in that number. That's been there, I think, 94% to 92%, if that's the right numbers, but it has been probably because of the mathematics around those highway sites.

Speaker #4: So, they were not, because our strategy now is to go with the WSA, larger investments. We had done a few pilots on the highway—a bit of a smaller size.

Speaker #4: So, those outlets we didn't look at renewing. So, I think that's why you've seen that marginal movement in that number. That's been there, I think, 94 to 92, if that's the right numbers.

Speaker #4: But it has been probably because of the mathematics around those highway sites.

Speaker #5: Okay. Okay. So my next question would be, since you already alluded to the fact that, you know, some manpower and operating costs have been incurred for the last—you know, we have gone for four airports, all of them—and the Warangal portal is also coming up, as you mentioned, on the 17th of August.

Sanjay Ladha: Okay. Sir, my another question would be, since you already alluded to that couple of manpower and operating cost has been done for the last. We have won for four airports and all of them, and the Bangalore port is also coming up, as you mentioned on 17 August. So the cost has been escalated. But the margin has been coming forward in the couple of quarters back. So maybe H2 onwards, the margin will start picking from there. Is the understanding correct?

Speaker #5: So the cost has escalated, but you know the margin has been coming forward in the last couple of quarters. So maybe Q2 onwards, the margin will start kicking in from there.

Speaker #5: Is their understanding correct?

Speaker #4: So if I can Sanjay if I can get if I understood your question right just tell me then if I got it. But what so generally our margin on most fronts I think we've been around the ranges we've said.

Speaker #4: There may be some level in terms of the you know especially like things around the employee piece which logically are the ones you need to get in advance you know in terms of you have your team members, they train.

Varun Kapur: Sanjay, if I understood your question right, just tell me then if I got it. Generally, our margin on most fronts, I think we have been around the ranges we have set. There may be some level in terms of the, especially things around the employee piece, which logically are the ones you need to get in advance, in terms of you have your team members, they train. There has obviously been one-time impacts currently. Even say in the backdrop of a challenging operating environment because of the Middle East, we still, I think, we have kept quite a bit of discipline around costs, and you can see that across coming in various of other cost lines as well in the ultimate delivery in the numbers.

Speaker #4: So there have obviously been some one-time impacts currently. You know, even in the backdrop of a, you know, challenging operating environment because of the Middle East, we've still, I think, kept quite a bit of discipline around costs. And you can see that coming through in various other cost lines as well, and the ultimate delivery in the numbers.

Speaker #4: But yes, compared to what we normally have seen, there's a little bit of—we've seen that little bit of extra cost coming through in a few lines, like you said, that impacts our EBITDA margin.

Speaker #4: You know, largely, I think it was labor which was the one that gets affected because of the pre-op and the advance cost that you need to take when you're opening new units.

Varun Kapur: But yes, compared to what we normally have seen, we have seen that little bit of extra cost coming through in the few lines, like you said, indeed, that impacts our EBITDA margin. Largely, I think it was labor, which was the one that gets affected because of the pre-op and the advance cost that you need to take when you are opening new units.

Speaker #5: So, my last question would be regarding—you know, you have now alluded to the opportunity, which is, you know, highways and all that. So, you know, for the last few quarters, you've only said that it's a long-term play.

Sanjay Ladha: Sir, my last question would be regarding you are now alluded to the opportunity, which is highways and all that. For the last few quarters, you have only said that it is a long-term play. But now when I see you have started alluding that you are looking forward to this opportunity quite robust. Is there government policies that have been changing? Are we changing some sort of strategically? What is the strategy you are looking forward in that space? Can you be louder on that side and explain more into that? Because until now, it was just an opportunity we were figuring out, and we are saying that it is a 3 to 5 year downtime frame. But currently, what I able to understand is we are aggressively looking into that highway space more. If you can explain me more into that.

Speaker #5: But now when I see, you have started alluding that you are looking forward to this opportunity quite robustly. So, are there government policies that have been changing?

Speaker #5: Are we changing something strategically? So, what is the strategy you are looking forward to in that space? Can you be clearer on that and explain a bit more?

Speaker #5: Because until now, it was just an opportunity we were figuring out, and we are saying that it's a three- to five-year down time frame.

Speaker #5: But currently, what I am able to understand is we are aggressively looking into that highway space more. So if you can explain more about that to me.

Speaker #4: Sure. I can talk a bit about that. But just as a bit of a context. So I think as a general business, I think yes, we we look at opportunities.

Speaker #4: We would obviously look at it aggressively. But at the same time, you know, cash generation return is top of the agenda. So I think, in any method, we won't compromise on that.

Varun Kapur: Sure. I can talk a bit about that, but just as a bit of a context. I think as a general business, I think, yes, we look at opportunities. We would obviously look at it aggressively. But at the same time, cash generation return is top of agenda. I think in any measure, we won't compromise that. And that has been something, I think the USP of the TFS business over the last decade and a half, and that has been the way we have run the business, and that is where we achieve the financial results plus cash balance, no debt there as well on our balance sheet. That is the approach. Coming to highways particularly, our plan is obviously from a company point of view, I do talk about future opportunities as well.

Speaker #4: And you know, that's been something I think is the USP of the TFS business over the last decade and a half. You know, that's been the way we've run the business.

Speaker #4: And that's where we achieve, you know, the financial results plus, you know, the cash balance—no debt on there as well on our balance sheet.

Speaker #4: So that's the approach. And coming to highways particularly, you know, our plan is obviously from a company point of view. I will talk about future opportunities as well.

Speaker #4: And I think, rightfully, I've always stressed that highways are probably what airports were when we entered in 2008 or 2009. And then, you know, there was a journey—obviously, we are talking about a time almost 17, 18 years later today where we sit.

Speaker #4: So, I think highways are at the point where now government investment is coming, expressways are being built—these, you know, wide multi-lane expressways, access-controlled, limited developments for retail, F&B through these wayside amenities, WSAs.

Varun Kapur: I think rightly we've always stressed that highways are probably what airports were when we entered in 2008, 2009. There was a journey. Obviously, we are talking about a time almost 17, 18 years later today where we sit. I think highways are at the point where now government investment is coming, expressways are being built. These wide multi-lane expressways, access controlled, limited developments for retail, F&B through these wayside amenities, WSAs. There's about 1,000 wayside amenity plan already announced by the government. That is to come. What I've been announcing is that we will be targeting those as those come online, that's basically a future opportunity. While I do talk and give a sense of the opportunity, obviously there's a lot of work going on on the back end.

Speaker #4: And there's about a thousand wayside amenity plans already announced by the government. But that is to come. So what I've been announcing is that we will be targeting those as they come online.

Speaker #4: And that's basically a future opportunity. So, while I do talk and give a sense of the opportunity, obviously there's a lot of work going on on the back end, and we're doing a lot of work—analysis, engagement, talking with potential partner brands, landlords, companies out there, oil marketing companies. You'll see some press around that as well.

Speaker #4: And so all of that is going on. But like I said, as we roll out, it's not something that we say we need to do immediately.

Varun Kapur: We're doing a lot of work, analysis, engagement, talking with potential partner brands, landlords, companies out there, oil marketing companies. You'll see some press around that as well. All of that is going on. Like I said, as we roll out, it's not something that we say we need to do immediate. We are looking at this as a medium long term with a very clear condition that financial return, our benchmarks, we need to be in line with those. Therefore, you'll see that happening in a calibrated manner to unlock a long-term opportunity rather than something we want to say we want to jump into on an absolute immediate basis.

Speaker #4: We are looking at this as a medium- to long-term opportunity, with a very clear condition that our financial returns and benchmarks need to be in line with those.

Speaker #4: And therefore, you'll see that happening in a calibrated manner to unlock a long-term opportunity, rather than something we want to jump into on an absolute immediate basis.

Speaker #5: Thank you, sir. All the best. Thank you.

Speaker #4: Thanks Sanjay. Thanks.

Speaker #1: Thank you. We will take the next question from the line of Vansh Gupta from Precinct Capital. Please proceed.

Sanjay Ladha: Thank you, sir. All the best. Thank you.

Varun Kapur: Thanks, Ajit. Thanks.

Speaker #5: Hi, sir. Thank you for the opportunity. Am I audible? Hello.

Operator: Thank you. We take the next question from the line of Vansh Gupta from Prescient Capital. Please proceed.

Speaker #4: Yeah, Vansh, hi. Yeah, please, I can hear you.

Speaker #5: Thank you, sir. So, just a couple of questions on mine. Given that some of our airports, like the Delhi T3 airport, they might be moving towards JV.

Vansh Gupta: Hi, sir. Thank you for the opportunity. Am I audible? Hello?

Varun Kapur: Yeah, Vansh. Hi. Clear. Please. I can hear you.

Speaker #5: Given that Delhi and Mumbai airports are perhaps the two biggest airports in the country, they should be contributing to a large part of their revenue and margins.

Vansh Gupta: Thank you, sir. Just a couple of questions from my end. Given that some of our airports, like the Delhi T3 Airport, they might be moving towards the JV, and given that Delhi and Mumbai airports are perhaps the two biggest airports in the country, and they should be contributing to a large part of the revenue and margins. I wanted to understand, is the EBITDA margin profile similar for our other airports, which is beyond Mumbai, Delhi, and Bangalore? Essentially, will our EBITDA margin profile be the same if our Delhi airport were to move towards the JV for the other airports?

Speaker #5: I wanted to understand, is the EBITDA margin profile similar for our other airports, beyond Mumbai, Delhi, and Bangalore? So essentially, will our EBITDA margin profile be the same if our Delhi airport were to move towards a JV model for the other airports?

Speaker #4: Hi Vansh. So, Vansh, just two things. First, just a point of clarification: Delhi T3 was already operating in a joint venture. Currently, that joint venture is in the form of an SPV, and that contract expires.

Speaker #4: The plan is, we will be building bidding through another joint venture with GMR that is a long-term joint venture, which is not in the form of an SPV.

Varun Kapur: Hi, Vansh. Vansh, just two things. One, just a point of clarification. Delhi T3 was already operating in a joint venture. It is currently that joint venture was in the form of an SPV and that contract expires. The plan is we will be bidding to another joint venture with GMR that is a long-term joint venture, which is not in the form of an SPV. That has been one which we have been calling out since a while. In terms of margin profile, I think irrespective it is a joint venture or it is a direct concession, the nature of that is quite similar. I think that plays out. I think what is more relevant is if it is new build and starting to normalize takes a bit of time, irrespective if it is a JV or non JV.

Speaker #4: So that's been one which we've been calling out for a while. In terms of margin profile, I think irrespective of whether it's a joint venture or a direct concession, the nature of that is quite similar.

Speaker #4: I think that plays out. I think what's more relevant is if it's new build, then starting to normalize takes a bit of time—irrespective of whether it's a JV or non-JV.

Speaker #4: So I think that's the more important criteria—that as contracts mature, profitability levels start kicking in more and more; because, you know, running it well, you understand the market, you've built all the changes in, teams are also clued on. Ultimately, it's a human business—selling.

Speaker #4: So all that plays out. So I think the timing is a more relevant point that plays out than, say, the type of entity it operates in.

Varun Kapur: I think that is the more important criteria, that as contracts mature, profitability levels start kicking in more and more because you are running it well, you understand the market, you build all the changes in. Teams are also clued on as it is a human business selling. All that plays out. I think the timing is a more relevant point that plays out than, say, in the type of entity it operates in.

Speaker #5: Got it, sir. Again, just for clarity—so you're saying that the Delhi airport was already operating under the SPV; it was not a part of your consolidated revenues?

Speaker #5: As in the consolidated revenue of the company report?

Speaker #4: No, Delhi T3 was part of it. It was a JV. In the JV, historically, we had a majority share, so we used to consolidate it.

Vansh Gupta: Got you. I mean, just for clarity, you are saying that the Delhi airport was already operating under the SPV. It was not a part of your consolidated revenues? As in the consolidated revenue of the company reports?

Speaker #4: In the new SPV, our shareholding with GMR is 30%. And therefore, that doesn't get consolidated going forward. So, it would still be a JV, but it would be part of our profit pickup.

Varun Kapur: No, Delhi T3 was part of it. It was a JV. In the JV, historically, we had a majority share, so we used to consolidate it. In the new SPV, our shareholding with GMR is 30%.

Speaker #4: That would come true.

Speaker #5: Got it, sir. And so, it's not the case that we have lower average selling prices across our airports other than Delhi and Mumbai, and so our margins would drop for other airports, right?

Vansh Gupta: Right.

Varun Kapur: And therefore, that doesn't get consolidated going forward. It would still be a JV, but it will be part of our profit pickup that will come through.

Speaker #5: Even if this were to move to a JV, wherein we have a lower share of the profits and the revenues.

Vansh Gupta: Got you. And so it's not the case that we have lower average selling prices across our airports other than Delhi and Mumbai, and so our margins would drop for other airports, right? Even if this were to move to a JV, wherein we have a lower share of the profit and the revenues.

Speaker #4: Yes, the margins won't drop. You just have your share of the share, the number is what it is. But obviously, I think the tender, for example, is for a larger set of outlets than what we currently had in Q3.

Speaker #4: So you know, that's been a strategy we call that always plays out, right? When you operate directly or something, you have a limited set of outlets.

Varun Kapur: Yes. The margins won't drop. You just have your share of the number is what it is. But obviously, I think the tender, for example, is for the larger set of outlets than what we currently had in T3. So, that's been a strategy we call that always plays out when you operate directly or something, you have a limited set of outlets. The joint venture, when these larger tenders come in, it's sizable and much more in terms of scale than what the early opportunity was.

Speaker #4: The joint venture, when these larger tenders come in, you know, it's sizable and much more in terms of scale than what the early opportunity was.

Speaker #5: Right. And so, do our ASPs also remain broadly at the same level across all our airports, sir? Our selling price.

Speaker #4: So, I'll just clarify. Between JV and as it moves, that would be similar because it's the same way of operating. But yes, across airports—just logically, the larger airports, metros, just because of the nature of travel, international travel propensity, per capita income in those cities.

Vansh Gupta: Right. And so do our ASPs also remain broadly along the same level across all our airports, sir?

Varun Kapur: That is

Vansh Gupta: Our selling price.

Varun Kapur: I will just clarify. Between JV and as it moves, that would be similar because the same way of operating. Yes, across airports, just logically, the larger airports, metros, just because of the nature of travel, international travel propensity, per capita income in those cities, spends would be a bit higher. That is why you see brands today, you go to Delhi Airport T1, you see a Gordon Ramsay there. You go to Mumbai, you are seeing a Wagamama in the airport. Automatically, those spends in those airports, because the premium offer type of brands, the absorption ability, the spends per consumer would be higher in that sense.

Speaker #4: Spends would be a bit higher, right? And that's why you see brands today—you go to Delhi Airport, Terminal 1, and you see a Gordon Ramsay there.

Speaker #4: You go to a, you know, Mumbai, you're seeing a Wagamama in the airport. So automatically you know those spends in those airports, because the premium offer-type of brands, the absorption ability, the spends per consumer would be higher in that sense.

Speaker #5: Right, sir. Understood. That seems fair. Just one more question from my end. So, in all of our concession agreements, are there baked-in step-ups to the minimum guaranteed rents that we pay to the landlords?

Vansh Gupta: Right, sir. Understood. That means, yeah. Just one more question from my end. All of our concession agreements, are they like baked in step-ups to the minimum guaranteed rents that we pay to the landlords? Is that like the rents, the percentage of revenue, both the fixed part as well as the variable part, that gets renewed only after the concession agreement expires?

Speaker #5: Or is that, like the rent—the percentage of revenue, both the fixed part as well as the variable part—that gets renewed only after the concession agreement expires?

Speaker #4: Yes. So our contracts are largely of the nature of a minimum guarantee and/or a revenue share, whichever is higher. That's the majority of the contracts out there.

Speaker #4: And that's what we are now performing, you know, because we've been there. I think we run well—you see the numbers. We tend to always go above the minimum guarantee.

Varun Kapur: Contracts are largely of the nature of a minimum guarantee and/or a revenue share which is higher. That is the majority of the contract how they sit.

Speaker #4: That's predominantly, I would say, probably across all the real estate we're running in that manner, where we're paying the revenue share amount. So the airport's also happy because you're beating the minimum guarantee they targeted.

Vansh Gupta: Right.

Varun Kapur: In touch with our performance, because we have been there, I think we run well, you have seen the numbers. We tend to always go above the minimum guarantee.

Speaker #4: And you're delivering a higher revenue share, which is where a partner like us comes in, right? We don't just deliver the MG. Airports will look at us as a partner who gets the right brands, the right experience, and actually overdelivers in terms of sales performance. Therefore, the airport earns more from the incremental revenue share that we can drive.

Vansh Gupta: Right.

Varun Kapur: That is predominantly, I would say, probably across all the real estate, we are running in that manner where we are paying the revenue share amount. So the airport is also happy because you are beating the minimum guarantee they targeted, and you are delivering a higher revenue share, which is where a partner like us comes in. We do not just deliver the MG. Airports will look at us as a partner who gets the right brands, the right experience, and actually over-delivers in terms of sales performance, and therefore, the airport earns more from the incremental revenue share that we can drive.

Speaker #5: Right, sir. So my question was largely whether that minimum guarantee—

Speaker #3: Sorry to interrupt Mr. Vansh.

Speaker #5: Ramesh just a follow up. Just a follow up one thing sir. So my question was largely whether the minimum guarantee that we give to all these airports as well as the revenue share percentage that we give to these airports are there like yearly step ups to these percentage of revenue share every year or do these percentage shares they get revised only upon contract renewals?

Vansh Gupta: Right, sir. My question was largely whether that minimum guarantee that we-

Operator: Questions for Mr. Vansh.

Vansh Gupta: Ma'am, it's just a follow-up. Just a follow-up from previous question. My question was largely whether the minimum guarantee that we give to all these airports, as well as the revenue share percentage that we give to the airports, are there yearly step-ups to these percentage of revenue shares every year, or do these percentage shares, they get revised only upon contract renewals?

Speaker #4: So the MG—so there's normally the contracts; every airport would have a differing way. I wouldn't say there's one set manner. So MGs normally would have an escalation.

Speaker #4: Revenue shares potentially could be a scenario where you have a revenue share in some contracts—maybe the same amount, some may have marginal escalation, but not really meaningful.

Varun Kapur: The MGs, there's normally the contracts, every airport would have a differing way. I wouldn't say there's one set manner. MGs normally would have an escalation. Revenue shares potentially could be a scenario where you have a revenue share. In some contracts, maybe the same amount, some may have marginal escalation, but not really meaningful. You don't see any sort of a real jump up that comes in where there's a meaningful jump there. In terms of what plays out more than that is probably the majority of the contract more than covers that. As the contract matures and you get a profitability, even if there are certain contracts that may have revenue shares logically of small jump here or there, 0.1%, 0.2%, or something of that nature, it doesn't really meaningfully influence the return benchmarks in the later years.

Speaker #4: Like, you don't see any sort of real jump up that comes in, where there's a meaningful jump there. So, in terms of what plays out, more than that is probably the majority of the contract more than covers that.

Speaker #4: You know as the contract matures and you get to profitability, even if there are certain contracts that may have revenue shares—logically, you know, a small jump here or there, 0.1%, 0.2%, or something of that nature—it doesn't really meaningfully influence the return benchmarks in the later years. That's because the upside on maturity performance, you know, because of our ability to secure, you know, when you get longer term, the profitability as traffic picks up and the same assets are performing better—that aspect actually flows in much stronger.

Varun Kapur: Because the upside and maturity performance, because of our ability to see when you get longer term, the profitability as traffic picks in, the same assets are performing better. That aspect actually flows in much stronger.

Speaker #5: Understood, sir. So, hypothetically, can the landlords revise the revenue share percentage with you every year?

Speaker #4: No, no, that's actually contractually built in. That's what I mentioned. So these are not.

Speaker #5: So the minimum guarantee?

Vansh Gupta: Understood, sir. So hypothetically, what the landlords can revise the revenue share percentage every year with you?

Speaker #4: The minimum guarantee. Every single.

Speaker #5: Okay, so they can't revise it every year. As long as the contract is valid, the revenue share percentage as well as the minimum guarantee remain stagnant.

Varun Kapur: No, that is actually, it is contractually built-in. That is what I mentioned. So these are-

Vansh Gupta: Oh, the minimum guarantee?

Varun Kapur: And the revenue share.

Vansh Gupta: The minimum guarantee?

Speaker #5: Of course, the minimum guarantee has some step-ups every year, but the revenue share percentage remains constant throughout the life of the contract.

Varun Kapur: Everything is like-

Vansh Gupta: Okay. They can't revise it every year, as long as the contract is valid, the revenue share percentage as well as the minimum guarantee, they remain stagnant. Of course, the minimum guarantee has some step-ups every year, but the revenue share, that percentage remains constant throughout the life of the contract.

Speaker #4: That's right.

Speaker #5: Understood, sir. Right. That's all from my end. Thank you so much for all that clarity. I wish you the best of luck. Thank you.

Speaker #4: Thanks a lot.

Speaker #3: Thank you. Ladies and gentlemen, we will take that as the last question for the day and would now like to hand the conference over to the management for their closing comments.

Varun Kapur: That's right.

Vansh Gupta: Understood, sir. That is all from my end. Thank you so much for all the clarity. Wish you the best of luck. Thank you.

Varun Kapur: Thanks a lot.

Speaker #3: Over to you sir.

Operator: Thank you. Ladies and gentlemen, we take that as the last question for the day and would now like to hand the conference over to the management for their closing comments. Over to you, sir.

Speaker #4: Great. Thank you to the ICICI Securities team for hosting us. We appreciate all of you taking the time today to join us for this earnings call post our Q1 results.

Speaker #4: If you have any further queries, please feel free to reach out to our Investor Relations team. A happy Independence Day in advance to all my fellow Indians.

Varun Kapur: Well, thank you to the ICICI Securities team for hosting us, and we appreciate all of you taking the time out today to join us for this earnings call post our Q1 results. If you have any further queries, please feel free to reach out to our investor relations team. A Happy Independence Day in advance to all my fellow Indians. Thanks a lot.

Speaker #4: Thanks a lot.

Operator: Thank you. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

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