Travel Food Services IPO review (Apply)

•    The company is a leader in QSR related services and F&B outlets on airports and highways.
•    It has its outlets on major airports in India and is planning to expand the same in line with the higher spending and infra developments on airports constructions.
•    The company has posted steady growth in its top and bottom lines.
•    As it enjoys niche place in the segment and will be the first mover, post listing fancy for this counter is not ruled out.
•    Based on its recent financial data, the issue appears fully priced.
•    Investors may park funds for medium to long term.

ABOUT COMPANY:
Travel Food Services Ltd. (TFSL) is the leading player in the fast-growing Indian airport travel quick service restaurant (“Travel QSR”) and lounge (“Lounge”) sectors based on revenue in Fiscal 2025, with a market share based on revenue (including Associates and Joint Ventures) of approximately 26% in the Indian airport travel QSR sector and approximately 45% in the Indian airport Lounge sector in Fiscal 2025, according to the CRISIL Report. Its Travel QSR business comprises a range of curated food and beverage (“F&B”) concepts across cuisines, brands and formats, which has been adapted to cater to customers’ demands for speed and convenience within travel environments. The company utilizes its F&B brand portfolio, comprising 127 partner and in-house brands, in the operation of 442 Travel QSRs across India and Malaysia as of March 31, 2025. 

Its Travel QSRs are predominantly situated within airports, with select outlets in highway sites. TFSL’s Lounge business comprises designated areas within airport terminals, accessible primarily by first and business class passengers, members of airline loyalty programmes, select credit card and debit card holders and members of other loyalty programmes. It had 37 Lounges across India, Malaysia and Hong Kong as of March 31, 2025. Through its Travel QSR and Lounge businesses, the company is present in 14 airports in India, three airports in Malaysia and one airport in Hong Kong as of March 31, 2025. According to the CRISIL Report, of the 14 airports in India in which TFSL operates, 13 of them were amongst the 15 largest airports in the country by passenger traffic in Fiscal 2025, based on air passenger traffic. According to the CRISIL Report, these 14 airports served 74% of the total air passenger traffic in India in Fiscal 2025. According to the CRISIL Report, such airports include the Delhi airport, Mumbai airport, Bengaluru airport, Hyderabad airport, Kolkata airport, and Chennai airport.

According to the CRISIL Report, the company operated the largest network of Travel QSRs outlets and airport Travel QSR outlets in India as of March 31, 2025, with 384 of its 413 operational outlets being situated in airports, and the remaining in highway sites. According to the CRISIL Report, it also operated the largest network of private airport Lounges in India as of March 31, 2025, comprising 28 Lounges across 10 airports. Since the opening of its first Travel QSR outlet in 2009, it has built capabilities and processes to effectively execute in, and address the distinct challenges posed by the operationally complex and highly secure airport environment, such as security clearances, stringent rules and restrictions, 24/7 operations, multi-brand and multiunit concessions, alongside various supply chain and infrastructure constraints. 

As of March 31, 2025, it had a total of 442 Travel QSRs, comprising 384 outlets across 13 airports in India, 29 outlets across two airports in Malaysia and 29 outlets across nine highway sites in India, operated directly through the Company and Subsidiaries and indirectly through its Associates and Joint Ventures. TFSL operated 270 Travel QSR outlets directly while the remaining 172 outlets were operated by its Associates and Joint Ventures, as of March 31, 2025. As of the said date, its F&B brand portfolio comprised 127 brands, of which 32 were international brands, 58 were regional Indian brands and 37 were in-house brands. The revenue is having contribution from Partner brands to the tune of 54+% and In-house brands contribution up to 45+%.

As of March 31, 2025, it had operating units on 18 airports in three countries with 442 QSR outlets and 37 operating lounges. Air transport infrastructure in India has improved over the years. The number of airports has grown from 102 in FY2019 to 135 in FY2024 and 138 as of September 2024.

As of March 31, 2025, it had a total of 5331 on-roll employees and 191 off-roll employees (including third party staff and independent consultants and retainers), Operating travel QSR outlets at the airports involves a lot of challenges such as high security and other clearances, for all the staff and employees working at the airport outlets. Airport travel QSR operators are also subject to complex tendering process which usually mandates many approvals and operational track record. In addition, constant innovation in product offerings for travelers customized to high profile airport environment with limited margin of error, time sensitive consumers, 24 x 7 operations, limited downtime and operational complexities can act as barriers to entry for airport F&B industry.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route secondary IPO of Rs. 2000.00 cr. (approx. 18181818 equity shares at the upper cap). The company has announced a price band of Rs. 1045 – Rs. 1100 per equity shares of Re. 1 each. The issue opens for subscription on July 07, 2025, and will close on July 09, 2025. The minimum application to be made is for 13 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 13.81% of the post-IPO paid-up equity capital. Since this is a pure secondary offer, no funds are going to the company. This issue is to provide exit to some of its stakeholders and for the listing benefits.

The company has reserved equity shares worth Rs. 4 cr. (approx. 36363 shares) for its eligible employees and offering them a discount of Rs. 104 per share. From the rest, it has allocated not more than 50% for QIBs, not less than 15% for HNIs and not less than 35% for Retail investors.

The joint Book Running Lead Managers (BRLMs) to this issue are Kotak Mahindra Capital Co. Ltd., HSBC Securities and Capital Markets (India) Pvt. Ltd., ICICI Securities Ltd., and Batlivala & Karani Securities India Pvt. Ltd., while MUFG Intime India Pvt. Ltd., is the registrar to the issue. Kotak Securities Ltd. is the syndicate member.

Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 3.03 – Rs. 276 per share (based on Re. 1 FV) between July 2009 and October 2024. The company also issued bonus shares in the ratio of 2.4 for 1 in November 2024. The average cost of acquisition of shares by the promoters/selling stakeholder is Rs. 0.00, and Rs. 85.25 per share. 

Post-IPO, its current paid-up equity capital of Rs. 13.17 cr. will remain same as this is an OFS only. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 14484.74 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has (on a consolidated basis) posted a total income/net profit of Rs. 1103.58 cr. / Rs. 251.30 cr. (FY22), Rs. 1462.40 cr. / Rs. 298.12 cr. (FY24), and Rs. 1762.71 cr. / Rs. 379.66 cr. (FY25). The company marked steady growth in its top and bottom lines for the reported periods.

For the last three fiscals, the company has (on a consolidated basis) posted an average EPS of Rs. 24.16 and an average RoNW of 34.60 %. The issue is priced at a P/BV of 13.82 based on its NAV of Rs. 79.62 as of March 31, 2025, as well as on post-IPO NAV.

If we attribute FY25 earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 38.15. Based on FY24 earnings, the P/E stands at 48.59. Thus, the issue appears fully priced. 

The company has reported PAT margins of 22.77% (FY23), 20.39% (FY24), 21.54% (FY25), and RoCE margins of 53.87%, 46.14%, 51.40%, respectively, for the referred periods.

According to the management, it is enjoying virtual monopoly in QSR services on the major airports in India, and is gearing to enter global markets for the said services. With the massive push by the Government of India to aviation industry and the speedy activities in establishing more new airports for various destinations, it augurs well for the company. It has tied up with Adani and GMR group for expanding its scope of business and is confident of maintaining the tempo of growth achieved in the last three fiscals. 

DIVIDEND POLICY:
The company has paid a dividend of 3693.03% (FY24), 843.02% (FY25), and 456% (during Q1 of FY26). It has already adopted a dividend policy in December 2024, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown Jubilant Foodworks, Devyani Intl., Saphire Foods, Westlife Foodworld, and Restaurant Brands, as their listed peers. They are trading at a P/E of 205, NA, NA, 973.0, and NA (as of July 02, 2025). However, they are not truly comparable on an apple-to-apple basis.

MERCHANT BANKER’S TRACK RECORD:
The four BRLMs associated with the issue have handled 71 public issues in the past three fiscals, out of which 15 issues closed below for issue price on the listing date.