TBO Tek

TBO Tek reported top-line and bottom-line growth in Q4 FY26 despite significant geopolitical tensions, particularly the war impacting key source markets like the Middle East and Israel. March 2026 was described as a 'washout' due to the war, leading to an estimated EBITDA loss of Rs. 30-50 crores and preventing operating leverage from flowing through for the full quarter. Despite these challenges, the company demonstrated resilience, with business recovery observed in unaffected markets and increasing recoveries in impacted regions.

The company's strategy focused on three pillars: increased investment in market development, anchoring around the luxury end of the travel spectrum, and integrating Classic Vacations. Market development investments, initiated in January 2025, have yielded positive results, with a dramatic increase in monthly transacting buyers over the last year. The luxury segment is seen as more resilient to geopolitical events and rising costs, with TBO Tek developing an AI-first tool called Voya to support complex itinerary bookings for travel advisors in this segment.

The acquisition of Classic Vacations, aimed at growing in the North America market, is progressing well, being more than six months into TBO Tek's fold. The integration process, spanning platforms, supply, and demand channels, is approximately halfway complete and is targeted for full completion by the end of Q3 Calendar Year. The take rate for Classic Vacations has improved from 23% at the time of acquisition to 25%, with higher EBITDA to GTV numbers.

Management anticipates Q1 FY27 to perform better than both Q4 FY26 and Q1 FY26, with moderate SG&A growth expected to lead to green shoots of operating leverage. While markets directly impacted by the war, such as the Middle East, are still below pre-war volumes, they are showing increasing recoveries. The company notes a shift in travel corridors and shrinking booking windows, but remains hopeful for quick business recovery once geopolitical outcomes are favorable.

TBO Tek experienced negative cash flow from operations and Free Cash Flow for the year, attributed to timing issues related to Brazil anticipation, delayed trade receivables due to the war and Eid holidays, and increased performance-linked bonus balances. Management expects these timing issues to resolve, with a commitment to revert to historical EBITDA-to-cash flow conversion percentages (historically >100%) by the end of the financial year.

The company's EBITDA to GTV ratio has been stable at 1% for the last three years. While some global peers are lowering take rates, TBO Tek operates in traditionally competitive markets like India and the Middle East, with a strategy to maintain current take rates and focus on market share. The growth in higher take rate markets like North America and Europe is expected to drive overall growth. The company does not view Expedia's B2B segment as a direct competitor, as their core business involves selling to partners rather than direct retail.

TBO Tek has a five-year debt with a one-year moratorium on repayment. Repayments are scheduled to commence from Q3 of the current financial year and will continue for the subsequent four years. The expected Effective Tax Rate (ETR) for FY27 is projected to be in the range of 18-18.5%, similar to Q4 FY26 levels.