Detailed Narrative
Q3 FY26 Performance and Classic Vacations Integration
TBO Tek reported revenue from operations of ₹784 crores for Q3 FY26, marking the first integration of Classic Vacations into its financial matrices. The enterprise take rate stood at 8.08%, with the organic business delivering 6.04% and Classic Vacations reporting 24.94%. The consolidation significantly expanded the platform's scale, though it introduced complexity in interpreting headline metrics, leading to a focus on gross profit as a more robust measure of value capture.
Profitability and Operating Leverage
Gross profit to adjusted EBITDA conversion at enterprise levels was 23.7% for the quarter, a decrease from 25.3% in Q3 FY25. The organic business achieved a 25.3% conversion, while Classic Vacations was 19.6%. Management anticipates significant top-line growth in Q4, particularly for the organic business, while SG&A growth is expected to taper down, leading to a meaningful flow-through to the bottom line and demonstrating operating leverage.
Air Business Performance and Outlook
The organic air business showed strong recovery, achieving 16% year-on-year growth. Despite this, the air business's Gross Profit (GP) was 1.1% in Q3 FY26, down from 1.15% in Q2 FY26 and 1.2% in Q3 FY25. Management expects the momentum in the air business to continue into Q4 and aims for double-digit GTV growth over the medium term⏳, emphasizing maintaining GP while growing in the early teens.
Classic Vacations Integration Strategy and North America Growth
The integration of Classic Vacations is progressing, with TBO already cross-selling its inventory to Classic Vacations' customers, showing promising early results. The full platform migration is a complex, multi-quarter project expected to take two to three quarters. The acquisition provides access to 10,000 active, high-luxury travel advisors in North America, and TBO Tek aims to achieve high double-digit growth in the overall North America business over the next three to four years.
Take Rates, Direct Sourcing, and Working Capital
The organic TBO hotel take rates have remained strong, influenced by ancillary businesses, the mix between enterprise and retail, and the Platinum program. TBO core's direct sourcing is about 40%, while Classic Vacations' is significantly higher at 80-85%. Classic Vacations operates on a highly negative working capital model due to long booking-to-check-in windows, which will contribute to negative working capital at the enterprise level.
Forex Management and Competition
The overall Forex impact has reduced year-on-year, with the company hedging 70-75% of its payment and collection differences in various currencies. Management noted that the competitive landscape remains largely status quo, though intensity can vary by geography. They also addressed concerns about large travel agents potentially bypassing the platform, stating this is rare for their business model which relies on a long tail of smaller businesses, and credit limits are managed.