Travel Food Services IPO

Leading Market Position: It holds a leading market share in Indian airport travel QSR (approximately 26%) and Lounge (approximately 45%) by FY25 revenue. It operates the largest network of Travel QSR outlets and private lounges in Indian airports as of March 31, 2025.

Strong Return and Earnings Performance: Travel Food Services reported a Return on Net Worth (RoNW) of 34.64% and an Earnings Per Share (EPS) of ₹27.58, far ahead of peers. In comparison, Jubilant FoodWorks had RoNW of 10.02% (EPS ₹3.41), Devyani 0.84% (₹0.08), Sapphire Foods 1.38% (₹0.60), Westlife Foodworld 2.01% (₹0.78), and Restaurant Brands Asia had negative RoNW and EPS (-23.80%, ₹-4.33). This shows the company is generating higher profits per rupee of capital and rewarding shareholders better than others in the industry.

Superior Profitability Margins: Travel Food Services achieved a PAT Margin of 21.54% and an EBITDA Margin of 40.07%, much higher than all listed peers. Jubilant FoodWorks had 2.64% PAT and 19.30% EBITDA margin; Devyani 0.57% and 20.31%; Sapphire 0.90% and 16.57%; Westlife 1.72% and 18.85%; and Restaurant Brands Asia had negative PAT margin (-9.02%) with 10.70% EBITDA. This reflects TFS’s superior efficiency and profitability.

Strong Financial Growth Trajectory: The company has demonstrated significant revenue and profit growth, with revenue from operations increasing at an annual rate of 26.4% and profit at 22.9% between FY23 to FY25.

Diverse Brand Portfolio: Its portfolio includes 127 F&B brands as of March 31, 2025, comprising 90 franchised partner brands and 37 in-house brands. This diversity allows it to cater to varied customer demands and effectively secure new concessions.

Proven Concession Retention Rate: Since opening its first travel food outlet in 2009, the company has kept about 99.45% of its airport contracts up to March 2025. This means airports trust them and keep renewing their agreements, showing strong performance and long-term relationships.

Experienced Management Team & Strategic Partnerships: It has a seasoned management team with an average of over 24 years of experience as of March 31, 2025. This is further bolstered by synergistic partnerships with SSP Group plc (a global F&B leader) and K Hospitality, providing extensive industry knowledge and operational best practices.

High Concession Dependence: In FY25, 95.55% of the company’s revenue came from airport contracts. This means the business depends heavily on getting and keeping these deals. If any airport doesn’t renew a contract or changes the terms, it could seriously hurt the company’s income.

Concentration on Top Airports: A significant portion of its revenue, 85.94% in FY25, was generated from its top 5 airports (Bengaluru, Delhi, Hyderabad, Chennai, and Mumbai). Termination of agreements or a decrease in passenger traffic at these few locations could have a substantial impact.

Shifting Operating Models of Airport Operators: Airport operators are now preferring to own majority stakes in companies that run airport food and lounge services. For example, in the Semolina joint venture with Adani Group, TFS’s stake was reduced to 24.99%. Because TFS no longer owns more than 50%, it cannot include the full revenue and profits from Semolina in its financial statements. It can only report its small share. This shift could lower TFS’s reported revenue and cash flows, even if the underlying business remains strong.

High Operating Costs and Rent: Rent costs, including occupancy costs, depreciation of right-of-use assets, and interest on lease liabilities, accounted for a significant 32.26% of total expenses in FY25. Increases in these fixed costs, compounded by potential pricing restrictions in concession agreements, could impact profitability.

Reliance on Franchise Agreements & Lounge Partners: Its business heavily relies on 90 franchised partner brands (contributing 54.37% of Travel QSR revenue in FY25) and long-term relationships with Lounge Partners. Failure to renew or attract new partners could adversely affect growth and financial stability.

Litigation and Regulatory Non-Compliance: As of the Red Herring Prospectus date, the company faces 41 direct tax claims and 4 civil proceedings against it, with an aggregate quantifiable amount involved of ₹104.77 crore. Adverse decisions in these matters or non-compliance with regulations could lead to significant liabilities and reputational damage.

Indebtedness and Restrictions: As of May 31, 2025, the company had debts of ₹274.13 crore, mostly in the form of bank guarantees. Its loan agreements come with certain rules, like limits on how much it can spend, borrow, or change its financial setup. If the company breaks these rules, it could hurt its financial health.