ET Intelligence Group: Travel Food Services (TFS) Plans ₹2,000 Crore IPO
In a significant move for the travel and hospitality sector, ET Intelligence Group’s Travel Food Services (TFS) is set to raise ₹2,000 crore through an offer for sale (OFS). This public issue will see the promoter group’s stake reduced from 100% to 86.2%. With a steady increase in revenue and net profit over the past two years, TFS is positioning itself as a compelling option for investors, particularly those with a high-risk appetite.
Company Overview
Incorporated in 2007 and headquartered in Mumbai, TFS operates a network of quick service restaurants (QSR) and lounges across airports in India, Malaysia, and Hong Kong. The company also has a presence at select highway sites in India. According to a Crisil report, TFS commands a substantial market share, holding approximately 26% of the Indian airport travel QSR sector and 45% of the airport lounge sector based on projected FY25 revenue.
The travel QSR business encompasses a diverse range of food and beverages across various cuisines and brands. Meanwhile, the lounge business offers designated areas within airport terminals, primarily accessible to first and business class passengers, members of airline loyalty programs, and select credit card holders. Currently, TFS operates 442 travel QSR outlets and 37 lounges, featuring 37 in-house brands and 90 brand partners, including 32 international brands. Impressively, the company has maintained a contract retention rate of 93.9% from 2009 until March 2025.
Financial Performance
TFS has demonstrated robust financial growth, with revenue from operations and net profit increasing by 26% and 23% annually, reaching ₹1,687.7 crore and ₹1,067.2 crore, respectively, between FY23 and FY25. The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) also grew by 21.5%, totaling ₹676.3 crore. However, the EBITDA margin saw a decline, dropping to 40.1% in FY25 from 42.9% in FY23.
A notable aspect of TFS’s financial strategy is its negative working capital days. The company benefits from receiving payments from customers upfront while enjoying a credit period with its creditors. This operational model enhances liquidity and allows for strategic reinvestment in growth initiatives.
Despite these positive indicators, the like-for-like (LFL) sales growth experienced a drastic decline, plummeting to 4.6% in FY25 from an impressive 166.6% in FY23. This shift is attributed to the launch of new terminals, which diverts passenger traffic from older terminals, thereby affecting LFL growth metrics. Consequently, LFL growth may not be the most reliable parameter for assessing the company’s overall growth momentum.
Market Concentration and Risks
A significant portion of TFS’s revenue—approximately 86%—is generated from the top five airports, indicating a high concentration risk. The company’s entire business model is heavily reliant on passenger traffic at airports, making it vulnerable to fluctuations in travel trends and economic conditions. Investors should consider these factors when evaluating the potential risks associated with the IPO.
Valuation Insights
As TFS prepares for its IPO, the company is demanding a price-earnings (P/E) multiple of up to 38 based on post-IPO equity and net profit for FY25. Notably, TFS lacks a direct publicly listed peer in the airport QSR sector, complicating comparative analysis. Other QSR chains may not be profitable, rendering their P/E ratios less relevant. On the price-sales front, TFS is seeking a multiple of eight, compared to a range of two to eight for peers such as Jubilant Foodworks, Devyani International, and Sapphire Foods.
Conclusion
As TFS embarks on this IPO journey, it presents a unique opportunity for investors willing to navigate the inherent risks associated with the travel and hospitality sector. With a solid track record of financial growth, a diverse portfolio of brands, and a strategic operational model, TFS is poised to capitalize on the recovering travel industry. However, potential investors should remain vigilant about the company’s high market concentration and dependency on passenger traffic, weighing these factors against the potential for significant returns.