TRAVELFOOD

Travel Food Services delivered strong Q4 and full-year FY26 results despite multiple disruptions, including geopolitical conflicts and airline operational challenges, which led to a muted 1.2% year-on-year passenger traffic growth across managed airports. Despite these headwinds, system-wide sales grew robustly by 25.4% to INR32.1 billion for the full year, and adjusted consolidated PAT increased by 21.5% to INR4.5 billion, demonstrating the resilience of the commercial model.

The company significantly expanded its footprint, growing its network to 20 airports and over 550 travel QSR outlets and lounges. This expansion included new entries in Cochin and Navi Mumbai, and enhanced presence at Delhi Airport's Terminals 1 and 2. TFS also strengthened its brand portfolio to over 145 brands, including new international partnerships with Gordon Ramsay and Wagamama, focusing on premiumization and differentiated F&B experiences across its offerings.

FY26 marked a milestone with the launch of the EATS platform, designed to enable direct bank-to-lounge access as an integrated service. This technology aims to enhance customer access, convenience, and engagement. Management indicated plans to further develop the platform by adding ancillary services to unlock incremental revenue opportunities, with the platform stabilizing well and receiving encouraging responses.

TFS maintains a strong balance sheet with a zero-debt position and approximately INR8.4 billion in cash and investments as of March 31, 2026, providing significant financial flexibility for future growth. The company announced an annual dividend of INR10.25 per share for FY26. Annual capex is projected to be in the range of INR50-60 crores for FY27, primarily allocated towards new unit mobilization and funding recent concessions in key airports like Delhi, Cochin, and upcoming Noida.

The lounge business continues to be a key growth driver, with management observing a diverging trend in the credit card market. While mass-market credit cards are seeing increased restrictions and spend thresholds, premium cards, which are growing over 50%, are offering more access and often include guest privileges. This benefits TFS as premium cardholders are typically frequent flyers, aligning with the company's focus on delivering premium experiences.

Gross profit margin improved significantly to 87.3% in Q4 FY26 from 83.0% in the prior year, and to 84.7% for the full year from 81.7%. This expansion was attributed to strong sales growth, higher contribution from value-led combos, and procurement efficiencies. Management anticipates gross margins to remain within the 80-83% range for the next year, despite some anticipated inflationary pressures, demonstrating robust cost management.

Trade receivables increased by approximately INR1 billion, reaching INR264 crores, primarily due to the initial ramp-up of the EATS business and new billing procedures with banks. This is expected to normalize to an average of 40-45 days of outstanding by the first half of FY27. Additionally, a one-time^📎 provision of INR212 million was made for litigation-related matters, impacting finance costs, though management believes its position on these matters remains strong.

Management expressed strong confidence in the long-term growth trajectory of the Indian aviation industry, citing low penetration of air travel, rising disposable incomes, and expanding airport infrastructure as key structural drivers. They anticipate passenger traffic to return to a 5% growth level in FY27 and are actively exploring opportunities for international expansion, building on initial successes in Malaysia and Hong Kong, and considering wayside amenity opportunities at access-controlled expressways.