Thank you, Anushka. Hello and good afternoon everyone present on the call.

I, on behalf of ICICI Securities, welcome you on the Travel Food Services Limited's Q1 FY27 earnings call. I would like to thank the management for giving this opportunity of hosting the call.

From the management, we have with us Mr. Varun Kapur, MD and CEO, Mr.

Vikas Vinod Kapoor, Whole-Time Director and CFO, and Ms. Chhavi Aggarwal, Vice President, Investor Relations.

I now hand the call over to Ms. Chhavi Aggarwal for the opening remarks.

Thank you.

Thank you, Ashutosh, and good afternoon. Welcome and thank you for joining us on the Travel Food Services Limited earnings conference call for the first quarter ended June 30, 2026.

The management will discuss the operational and financial performance for the quarter and address the question-and-answer session. We will be referring to the earnings presentation, press release, and the financial results uploaded on the stock exchanges.

Before we proceed, here is a disclaimer to the call: a few statements by the company's management in the call can be forward-looking in nature and we request you to refer to the disclaimer in the earnings presentation for further details. Now, I would like to hand over the call to Mr.

Varun Kapur for opening remarks. Thank you.

Good afternoon, ladies and gentlemen. Thank you for joining us for the earnings call of TFS for the first quarter of this financial year.

I hope you have had the opportunity to review our Q1 FY27 results and the investor presentation released yesterday. Let me begin with an update on the operating environment followed by the key highlights of our performance, after which our CFO Vikas will take you through the financials in greater detail.

We have begun the new financial year on a strong note. Despite the disruptions arising from the ongoing conflict in the Middle East, we delivered double-digit growth in both sales and profitability, continued to expand our network, and further strengthened our position across key airport markets.

Let me start with the operating environment. Passenger traffic remains the single most important external driver of our business, and during the quarter, it was impacted by the Middle East conflict, particularly on international routes.

Domestic traffic registered modest growth, but a significant decline in international traffic resulted in overall passenger traffic being broadly flat year-on-year for the quarter. For some added color, the quarter began with a decline in overall traffic in April.

May saw a gradual stabilization in traffic trends as disruptions eased, with domestic traffic returning to growth, while international traffic continued to face headwinds despite improving conditions. In June, traffic softened again following renewed conflict-related disruptions.

That said, one of the clearest lessons of the past several years has been the resilience of travel demand. Time and again, we have seen passenger traffic and traveler spending rebound strongly once disruptions ease.

Even during the current quarter, the temporary easing of geopolitical tensions in May led to a sharp rebound in travel activity, particularly in domestic travel, resulting in the highest ever single month of domestic air traffic in India, particularly notable against a softer base in the same month last year, and underscoring the resilience and strong bounce-back capability of the Indian travel market. Against this softer traffic backdrop, where we also saw higher cost and inflation pressures, TFS delivered another quarter of strong performance.

System-wide sales grew by 18% year-on-year to 8.4 billion rupees, while consolidated profit after tax increased by 35.6% year-on-year to 1.3 billion. Vikas will cover the financials in detail, let me focus on what these numbers tell us about the business.

We sustained strong momentum in new outlet openings, backed by recent contract wins and a robust pipeline, which translated into net contract gains of 15.9% year-on-year at a system-wide level. A few markets saw softer like-for-like performance during the quarter, notably Mumbai and Guwahati owing to traffic migration to new airport infrastructure, and certain Southern India markets given their relatively higher exposure to Middle East traffic.

As a result, system-wide LFL sales growth was 0.8% for the quarter. Importantly, excluding these specific markets, like-for-like sales grew around 7% year-on-year across our wider network.

During the quarter, we commenced operations at Noida International Airport, taking our system-wide presence to 21 airports. Over the last 12 months, we have added 87 travel QSR outlets and two lounges across the network, with significant additions at Mumbai, Delhi, Hyderabad, Cochin, Navi Mumbai, and Noida airports.

Our system-wide footprint, as of June end, stands at 580 travel QSR outlets and lounges, while our brand portfolio has expanded to 153 brands. We remain focused on creating a differentiated food and hospitality experience for travelers through a carefully curated portfolio of international brands, regional favorites, and our own in-house concepts.

On the lounges side, we continue to see an encouraging response to our premium offerings and customer experience initiatives. We are also increasingly leveraging technology to deepen engagement with passengers and partners, while creating additional avenues for monetization.

Another important milestone during the quarter was the successful launch of our passenger services at Noida International Airport under our Elite Assist brand, including meet and greet and porter services. These offerings complement our existing lounge network and will integrate into our Eatz technology platform, allowing passengers to use them alongside other experiences, further strengthening our ability to offer a comprehensive suite of airport hospitality and services, and to enhance the passenger experience through a single, connected ecosystem.

Beyond the quarterly numbers, what excites us most is the scale of the platform we have built for future growth. Over the past year, we have expanded meaningfully across new airports and terminals, commissioning a large number of new outlets.

Importantly, many of these assets are still in the early stages of ramp-up, which means a significant part of their earning potential is yet to be realized. As passenger traffic normalizes and builds, these units are positioned to contribute progressively and increasingly to our performance.

The investment is already made, the capacity is in place, and we are ready. When traffic returns, and history tells us it will, TFS is well positioned to benefit from the network and groundwork we have put in place over the past 12 months.

Looking ahead, several important growth catalysts are set to come online. The opening of Bhogapuram Airport on 17 August marks another significant milestone, where we will operate multiple outlets under our JV, GHL.

In parallel, we intend to progressively expand our passenger services platform to additional airports, building on the encouraging early response at Noida. We also have a strong pipeline of growth opportunities, with over 50 outlets currently under development across our network.

As these locations open and then mature over the coming 12 to 18 months, they are expected to provide a meaningful uplift to both revenue and earnings. The current environment reflects a temporary disruption.

The long-term drivers of Indian aviation remain firmly intact, supported by rising air travel penetration, expanding airport infrastructure, increasing connectivity, and a growing propensity to travel. With a combination of network expansion, a robust pipeline of new units underway, expanding passenger service offerings, the effective and efficient use of technology, and a strong debt-free balance sheet, we believe TFS is better positioned than ever to capture the opportunities ahead and to continue creating long-term value for all our stakeholders.

I am genuinely excited about the path ahead. With that, I will now hand over to Vikas, who will take you through our financial performance in greater detail.

Thank you, Varun, and good afternoon, everyone. I will now take you through the financial performance of the company for Q1 FY27.

System-wide sales for the quarter reached 8.4 billion, representing a growth of 18% year-on-year. At a consolidated level, revenue from operations grew by 20.6% year-on-year to 4.5 billion.

Consolidated like-for-like sales growth stood at 4.2%, while net contract gains remained strong at 20.2%, reflecting the contribution from recently commissioned units across Delhi, Cochin, Noida, and other key locations. Also like-for-like sales growth was driven by menu innovations, promotional initiatives, and calibrated pricing.

On the margin front, reported gross profit stood at 3.9 billion, with a gross profit margin of 85.7%. As highlighted in our presentation, gross profit margin reflects the accounting treatment of the lounge aggregation business, where revenues are recorded in the sales, while the related service costs are classified under other expenses.

Adjusting for this reclassification of 223 million of lounge aggregation cost from other expenses to cost of sales, the adjusted gross profit stands at 3.655 billion, translating into an adjusted gross profit margin of around 81%, which remains well within our guided range. Further, employee cost increased during the quarter, primarily due to annual compensation revisions and the onboarding of additional manpower to support recently opened outlets at Noida and Cochin airports, both of which are currently in the ramp-up phase.

The increase also reflects staffing for the newly launched passenger services business at Noida Airport. Other expenses witnessed a similar trend, driven by investments in these growth initiatives.

EBITDA stood at 1.6 billion, up 11% YoY, and EBITDA margin moderated to 35.8% for the quarter, reflecting the impact of higher employee cost and operating costs associated with recently commissioned airports and new business initiatives. These investments are strategic in nature and are aimed at supporting future growth and scaling up of the business.

On the profitability front, our performance remained strong. Consolidated profit after tax increased by 35.6% year-on-year to Rs 1.3 billion, and PAT margin expanded to 28.5%, compared with 25.3% in the corresponding quarter last year.

The overall improvement in profitability was driven by continued sales growth, despite flat passenger traffic, along with higher other income, which included a benefit of 131 million arising from write-back of a GST provision following a favorable rectification order received by the company. Our JV portfolio continues to ramp up and has also performed well across both domestic and international markets during the quarter, and is expected to benefit further as operating conditions improve and new units mobilize.

Our balance sheet remains a significant source of strength. As of June 30th, we maintain a debt-free balance sheet and a consolidated cash balance of approximately 9.7 billion.

This provides substantial headroom to fund airport expansions, lounge and highway growth opportunities, passenger services, and other strategic initiatives. While near-term operating conditions continue to be influenced by external developments, we believe these factors are temporary in nature.

The investments we have made across new airports, outlets, lounges, and passenger services are still in the early stages of ramp-up and provide a strong platform for future growth. Combined with our strong balance sheet, healthy cash position, disciplined approach to execution, and proven ability to navigate external headwinds, we believe TFS remains well positioned to continue delivering sustainable growth and long-term value creation for all our stakeholders.

With that, I would like to hand the call back to the operator and open the floor for questions.

Hi, Varun and Vikas. Kudos to the team.

My first question is on the passenger traffic. We had a flat base on the passenger traffic while the LFL still grew 4.2%.

I just want to understand how much of the LFL growth came from the higher spend per passenger versus other initiatives, and what is the sustainable trend or the sustainable level of the LFL growth if passenger traffic returns to normal growth?

Hi, Akshay. Thanks for your question.

What you have seen, I think across the last few quarters as well, always passenger traffic is a very important driver of, ultimately, the LFL growth that's there in the market. What we did see is during this period, as I mentioned there, very pronounced drop in passenger traffic, especially on the international sides.

While traffic was flat largely because of May, bounce-back, that kind of made the number flat, the other quarter the other two months we saw actually, traffic dropping down, especially on the international side, and which are generally, good spending consumers that come in there. With that, with I mentioned in my when I was talking earlier, 0.8% was, the system-wide number where LFL was there, but actually if you remove some of those external effects for the markets that were more affected, you saw 7% kind of LFL growth, for more of the flattish markets.

In a sense, if you see, we tend to be in that range of more than passenger traffic, somewhere in the 5% to 7% above that at least in terms of performance. That's what, the last few quarters showed as well.

As we expect passenger traffic to come back, as you're saying, that trend is what we expect to continue seeing going forward as passengers continue to spend, as more come through, and many of these sectors come back, which were temporary disrupted.

Given the 4.2%, what is the growth from the higher-spend passengers? Or the contribution?

So

4.2% relates to console, what I was talking about. In terms of higher spend, see, the way it works out, I think it's a blend of different areas.

It would be wrong to look at what is a single aspect, because obviously there were effects where, for example, on price, we've not done a significant price escalation as well this year. We've been a bit tempered in that as well.

I think what has been there is that just in terms of normal initiatives that we've been done around, we've still kept that delta of around 5% to 7%. Combination is coming, no doubt, a part of it from price, but not as much.

Part of it is coming from initiatives we would do around premiumizing, initiatives we would do around being bundled together. Also in few cases, brand edits or changes in limited cases.

All of those combined kind of get blended into that number of change.

Got it, got it. My second is on the economics of scale.

Over the next 3 to 5 years, what will improve the economics of TFS beyond the passenger traffic growth? If you had to go on a pecking order, will it be more on the premiumization, or the higher spends per passenger, or better contract terms?

I think the way our contracts work, and I think that's a important reference point to look at, is that our model is that when we invest up front, the nature of our contracts is that in the early days of any contract, the numbers tend to take some time to hit normalization. That's because you can imagine, right?

When you go into a new airport, you invest. It takes you that period maybe 12 to 18 months for running airport, maybe 24 months for greenfield, because passenger traffic takes a bit of time.

We also understand where gates are being used more, what type of brand works, some location and some challenges. All of that plays out.

Sometimes we even change the brand at some point in time if it was not fitting in. All of that probably plays out over that 12 to 24 month horizon depending on the nature of the terminal, right?

A new terminal like a Noida, Navi Mumbai, as you'd see in the press, would take some time for traffic to pick up and that to normalize, whereas running airports are a bit faster, right, where they're already there. I think that combination, that's the way our numbers play out.

Therefore, we're always, as you saw, winning new contracts over the last year. It would be evident, we have quite a strong pipeline.

Existing units that are there perform well, that's where economics improve. Obviously you have this bunch of new units come.

Yes, the last year, we've had a strong pipeline of almost 90 units across travel QSR and lounges come online. Quite a big pipeline, which I think is obviously for a short term you have an increased cost that plays out, but in the long term, there's a lot of firepower there that will unlock earnings potential as we go, as those units normalize over the next 12, 18, 24 months, those benefits will play out in our business.

Perfect. Last question is on the capital allocation front and the balance sheet?

We have a sizable, good balance sheet and also given the current expansion opportunity, now how do you decide where to deploy capital? What I'm looking is more importantly, what return threshold do you look for when bidding for a new airport or adding an outlets?

Is the competitive bidding putting pressure on these return expectations?

I will take that question, Vikas here. We are a cash generating company and a growing company at that.

Like we have clarified in the past as well, that we are extremely prudent with our capital allocation strategy. It's more driven by the units that we are currently in the phase of ramp-up.

Over and about that, we constantly explore new opportunities that open up in airports which are on our target. In terms of that, the entire approach that we take is that we should be getting returns which at a maturity level mimic our rest of the portfolio from that perspective, and that's where in our focus is there.

We won't be chasing growth unnecessarily unless and until it gives sustainable long-term profits for all our stakeholders.

Got it. I just wanted to understand the economics on bidding and also the opening of the new outlets.

What will be the maturity period and also the operating leverage that we'll be getting in from here?

Like I mentioned, the maturity in a sense what happens is you start hitting normalized profit levels for a existing airport. Today, it's an airport which is already running, say Delhi or Bangalore, existing terminals you come in, you take say 12 to 18 months to get because those are running, you understand it, your teams get used to it.

Any issues on operation side, production side, you get those streamlined. 12 to 18 months is normally the level we see.

For greenfield, which is a brand-new airport constructed from scratch, it goes in the 18 to 21 24 month type of horizon where you get to those normalized profit levels. I think that's where, I think TFS, from our point of view in this sector in terms of market leadership, I think the brands we bring, the understanding of the sector, the larger investments in back-end areas, we do enjoy, I think significant strength in terms of operating these contracts, winning these contracts, running these contracts, which is where I think and that's why you kind of see the performance levels that come in, that discipline on execution, which I think in terms of hallmark of our performance.

That's why we can achieve these results because of all those strengths which have been built up over multiple years and experience, and with the teams that we have here who've done it for many, many money airports, many outlets across the board.

Thank you and good luck, all the best.

Thank you.

Hi. Thanks for taking my question.

My first question is on your guidance. As you mentioned that 50 outlets under development and you're expecting meaningful uplift to the earnings.

Is that that's on what time horizon we are talking about? Are you talking about Q2, are you talking about full year?

Can you please give a bit of color? Then when you say 50 outlets, is that total QSRs or are you adding some business lounges also?

Hi, Achal. Thanks for your question.

Varun here. I think two parts to that.

One to just give a bit of color around it. I think from an earnings potential point of view going forward, there are two aspects that play out.

One, we have existing units that we built say over the last 12 months, which is roughly about 90 units we've already mobilized and activated. Those, some of them which were in the early part of the year are hitting coming to normalization and maturity levels.

A large part of those happened in the last two quarters, and those outlets will hit normalization over the next, say, 12 months approximately. That benefit, yes, will play out over the next 12 months.

We see a kind of a double impact of that, with traffic coming back as well, which has been a hallmark I think of the Indian aviation industry is being growing strongly. I think that's the expectation in the second half of the year.

In terms of the 50 units we're referring to, those are more outlets we're actually constructing as we speak. Those are not even online.

Those would come online say in this fiscal year. A large part of those is the plan that they will open up.

Some are being constructed, some are about to start construction. In a sense, that's the pipeline that we already have signed up.

Once those mobilize, again, it will follow the same sort of scenario of 12 to 18 months for the ones that are in existing terminals and a little bit longer for the greenfield ones that are in new airports like Noida, for example, we have a set of outlets coming up there, Navi Mumbai as well. Those take a little bit more time to normalize with traffic coming in slowly into those airports, etc.

That's how we see it playing out.

This 50 outlets which you're talking about, it's mainly on existing airports, right?

Sorry, I didn't catch that fully, Achal. Could you repeat that?

I said all these 50 units which you're talking about, which are under development, all these are on the existing airports. Can you give a bit of color and which airports are you talking about?

Is it like Noida, Navi Mumbai, or is it like on the existing airports also?

These 50 would be in airports we've already announced. These would be, which awareness would be there, these are build-outs which may have been won on contracts 3, 6, 8 months ago and build-outs happening.

A good example would be it could be outlets that are happening in, say, Delhi, but at the same time could be outlets happening in Navi Mumbai where we've activated some already, as well as some outlets say happening in Bhogapuram. It's a blend of multiple airport outlets that are there, which are already secured by us and we're basically in the process of mobilizing those outlets in these ones.

Perfect. Second question is about the near term, basically the second quarter.

I can see that the traffic is already down, domestic traffic is down 6%, international traffic is down about 4%, while in the Q1 of course the traffic was flat, but your major growth will came from the new contracts. How do you see the second quarter?

We are standing in the middle of August, you must have got very clear picture. Any color on the second quarter, please?

The second quarter in a sense, while you know I I'm not going to be limited to passenger traffic information that's visible in public now, I think in terms of what you're seeing out and you would have seen a similar commentary across, I think it's a very currently till about August, it's a similar trend to Q1. Traffic is around at similar levels is what we are seeing playing out.

I think the rationale would be that so domestic international traffic again is where a bit of the delta sits again. That's the thing.

I think you may have got visibility because I think the airlines have all come out and mentioned particularly. If you saw, I think it was the month of May, towards the end of May, many of I mean our two of the largest airlines here suspended a lot of international routes.

A few happened earlier and then as well there were quite a few international routes, especially long-haul, right, logically with fuel prices where they were were being suspended. I think they've already come out and called that you start seeing from September into October restoration of many of those long-haul international routes.

That's automatically where we expect to see that flow through. The expectation is H2 of the H2 of this year should be a good bounce back on passenger traffic.

I think that's also been a call-out by many independent research that's been calling out what they expect passenger traffic this year in India to be a strong H2.

Right, fair enough. Then finally, I also want to understand about your plan on the international side.

I think previously you mentioned that you're looking for the growth in the international markets. Any thought on that, please?

No, yes, no, completely, I can talk about that. As we've had success quite in Malaysia, which we expanded post-COVID.

Hong Kong as well we went in, we won a second lounge in Hong Kong. We're present there in January we entered that business as well.

Those are performing well, maturing. Again, like I said, ramp-up stage happening on many of those units that have opened say in the last two years.

Those are doing well for us. We have our focus, which I've always called out, was look at the Middle East and Asia.

I think just with the way situation is right now, I think Asia is a bit more of the focus until things in the Middle East normalize. We set up joint ventures.

We had set up in Dubai earlier to focus at the Middle East. We had set up an entity in Dubai to focus at the region.

We set up another entity recently in Indonesia to look at opportunities there, because we need those local entities to be able to bid for opportunities in the markets. We are quite focused on that.

We do see opportunity clearly coming up to bid for pitch for in those markets and we will be quite focused to take part in those opportunities. That's the plan at least for the year as well.

Fair enough. Sir, last question on the cost side.

Sure.

Hi. Thanks for the opportunity.

My question was on the growth of associate and JV business. It was relatively muted compared to your console growth.

If I see Adani F&B and lounge revenue, it has grown by 55% YoY. GHL, JMR reported in the presentation reported by GHL, it's around 22% YoY growth.

What's the reason for our 15% growth in this associate and JV business?

Purva, hi, this is Vikas here. In the case of the JV business which is there, there are other players as well as in some of the markets that where our JVs operate, and some of the units have to move to us or the JV structure over a scheduled period of time, which we have clarified in the past as those contracts go over.

From that perspective, there would be definitely a mismatch between the growth trajectory of our JV models compared to the overall growth that could be experienced at some of our airport operator partners, number one. The second important fact is that a lot of the airports on the western side, which had Middle East as a strong market, have been impacted in terms of the passenger traffic as well as the overall sales part.

That forms a bulk of our JV portfolio from that perspective. That is where you see the gap in terms of our system-wide revenues versus the overall revenues.

Got it. Secondly, are there any new upcoming airports which we are planning to bid for?

The recent Bangalore contract which we won, how many outlets are we looking at there?

Purva, hi, Varun here. One to answer your question, first part I did talk about a bit earlier about the international piece, I won't touch on that again because there we are looking at expansion, especially on the Asia opportunities.

In India, looking particularly in airports, Bangalore T1 we do see opportunity. Yes, we did win one outlet, which is a very prominent outlet for those of you flying through T1, you'd normally see a KFC.

It's one of the busiest outlets there. We're doing a KFC in that airport.

That's what we had called out. That was the first outlet.

Part of Bangalore T1 is going through a massive upgradation plan. The airport's really creating something spectacular.

We do see a lot of opportunities coming up there, which we will bid for over the next 12 months. Those will come up in phases.

That's our expectation. Tier 2, a lot of airports are there as well.

Part of that also there's few other AAI airports coming up, example being next 2 years I think Pune is coming up, again is one of top 15 we're not there at. I think that we have quite a bit of opportunity there.

Aside from even airports, we are seeing even highways as an opportunity which we are looking at, and we're seeing that particularly with the wayside amenities plan that the government announced in the expressway rollout. We see that also as a medium-term to long-term plan, part of our strategy.

Got it. That's it from my side.

Thank you.

Thank you.

Hi. Thank you for the opportunity.

My first question is on what is the sustainable LFL and net contract gain we are targeting to grow YoY? Hi,

Aachal. Varun here.

I think in terms of net contract gains, first of all, I wouldn't call out a number because I think that depends year-on-year, right, what we wins. It's a bit while generally it's been, we've seen quite good success, as you would have seen our results, which we've always been calling out, plus part of our when we went for an IPO, we put those numbers out.

You've seen that being consistent there year-on-year, but it's something which is a bit lumpy, right? Sometimes you win 30 outlets, sometimes another 50 outlets, 20 outlets.

It's not exactly a more of a straight line, it tends to be a bit lumpy, but we've been quite successful over the last few years in terms of our net contract gains. Currently, we did about 16% system-wide.

I think historically we've all kind of been in that ballpark with our numbers. In terms of LFL, we also what we've seen, I think I mentioned in one of the earlier questions, the LFL tends to be largely impacted by passenger traffic as a single biggest external factor.

I think we've been quite consistent in terms of how we've been able to initiatives around price, around driving, brand changes to all push LFL, so, in that range of at least being 5% to 7% above passenger traffic. That's been the strength of our model, which normally in the high street is a bit of a challenge.

We've traditionally been where we are used to passenger traffic somewhere around 8% to 9% in normal years, and you drive maybe 5% to 7% more of LFL growth over that to kind of reach an LFL percentage maybe around 14%, 15%. That's been a more of a normalized year.

Obviously a year like this, where passenger traffic has been flat, the idea is LFLs would be about in that similar range is what we would normally see. Challenge being that some of the particular airports where the international traffic was strong this year, like I mentioned the Southern India markets, plus with some of the terminal transfers, this year this quarter was a bit of an anomaly, but that's how normally we look at LFL, which tends to be more passenger traffic kind of the barometer linked to that.

Got it. Sir, this quarter we have seen an increase in other expense by 40 bps.

What lead to increase this, and how much we are targeting going forward?

Hi, this is Vikas here. The reason for higher other expenses in the quarter is, like I clarified even in my speeches, there was roughly around 223 million of lounge aggregation cost, which has been classified in other expenses.

As the business becomes meaningful, most likely we will show it as cost of sales separately. Excluding that also, the other expenses, while they have increased by 22% year-on-year, which is in line with the business growth.

This is currently, as you are aware, that we are in the ramp-up stage of opening or mobilizing units in airports like Cochin, Delhi, as well as Noida, and as part of that, there are higher pre-operating costs, which increases during this period. It tends to normalize between the 12 to 18 months a timeframe.

From that perspective, we believe that we should be coming back to our original numbers what we have been traditionally showing within the another 12 months or so from that perspective.

Okay. One more, just a clarification that I need.

Delhi T3 we have just for first half, and in the second half, it is moving to JV, right?

At this moment, the Delhi T3, which is a material subsidiary, the contract is till 30th September 2026. The JV GHL has bid for the contract, but the results are not out at this moment, I can't comment on H2 as of now.

Sir, which are the other airports which are coming for the renewal?

Like we had clarified in earlier calls as well, there would be Chennai and Calcutta airports which would be coming at the end of March '27 and early quarter 1 of 27-28 for renewal purposes.

Okay. Thank you.

That's it from my side.

Good morning, team. Congratulations on a good set of numbers, and thank you for taking my question.

Moving forward, my understanding is that the JV business will predominantly come from the airports that are managed by our JV partners namely Adani, and other operators. I'm more concerned about the non-JV business, right, on the console level.

Could you just maybe comment on the contract gains and the quality of contract gains in these airports, and your general expectations of how that market will evolve? Like will we see a discrepancy between our JV entities and the console business?

One of my main concerns is to do with the profit share, right? The JV profit share is significantly lesser than the console business.

Just want to qualitatively understand the difference between these two businesses. Hi, Naveen.

Thanks for the wishes.

In terms of one thing just to clarify, our JVs are not only the ones you mentioned here in India, but also we have a significant portion of JVs our Malaysia business international business is also the JV. It's a broader set of joint venture business that you see in our numbers.

In terms of how the JV businesses and the business on say the non-JV that we have here, to give a perspective, like this year, which we had won earlier during the year, announced at different times, Cochin, for example, was the one we picked up directly. Another one, which we mobilized currently in this month, part of our earnings presentation was Noida Airport as well, that we are mobilized a few units, still to mobilize a set of units.

There has been quite a bit of openings there as well. Bangalore, we spoke about there as well, we picked up a unit in T1 when we see quite a bit of opportunity coming there as well.

I think the way we look at it is there are two clear drivers of the business even in the Indian market, aside from even the international opportunity, where we have kind of these two opportunities of growing both through joint ventures with partners we work closely with, and at the same time, we have a large part of the airports, where we work with, which could be a combination of private owned, could be a combination of run by AAI, which also is a large opportunity. In terms of growth, very similar drivers for both, ultimately we're operating these businesses, and very similar drivers, because in terms of passenger traffic, it tends to be obviously you have some nuances like what happened this quarter with, Southern markets logically being more affected for international traffic to the Middle East, but largely, the growth has been quite democratic across India in air traffic.

You've seen strong growth across whether JV, non-JV, large, small airports, they've been quite robust and balanced growth across all. Therefore, we see these two avenues actually growing hand in hand during normalized periods.

Okay. Just a small follow-up before I move to my last final question.

My understanding about the industry as a whole globally and in India is that the standard operating model whenever there's a private player involved is through a JV, right? Just wanted your thoughts on whether we see the console business shrinking and the JV taking up a bigger chunk of the business or not, was what I was trying to get some clarity on.

Actually just to correct it, that information would be incorrect where you'd have got it from, because the majority of airports work directly. Where JVs are, probably what you were referring to, is where multi-airport operators.

JVs generally work where someone is running multiple airports. It makes sense for them to have a partner across this multiple, because the effort of putting a JV in, running it, the cost for that of a separate individual vehicle with a set makes sense when you're running multiple airports.

When you have a single airport, those efficiencies don't play out the same manner. Globally, more often than not by a wide margin, direct concessions is the norm.

JVs tend to be in these type of examples where you have, say, an operator maybe running 5, 6, 7 airports, and that's where we've seen globally as well more often than not, maybe one or two exceptions, but largely that's how the model what we've seen in our experience.

Got it. My next question is just on a bookkeeping level only.

It's a small question. Between the gross level and the operating level where around 45% to 50% of sales is costs, right?

Just want to understand how much of this is fixed and how much of this is variable, because I feel like both the other expenses and the employee line item have both variable and fixed components, right? Just want to understand what percent of costs would be fixed, basically trying to understand how operating leverage might play out in this business.

By default, roughly around 8% to 10% of our cost tends to be fixed, because in terms of occupancy cost, you have these CAM charges and other charges which are levied by airport operators which are fixed in nature, which we have complete visibility how they grow or ramp up over the course of the contracts. Further to that, there are only limited amount of fixed costs per se.

Labor is semi-variable in the sense because India as a market is a fixed wage market from that perspective. Where the economies of scale for a player like us step in is our size and scale at existing airports wherein we are able to bring in efficiencies in back of the house, be it stores, be it in terms of procurement strategies, be it in terms of that if suddenly international traffic is impacted, we can move our staff or manpower from international to the domestic side of the terminal.

Those are the leverages that we tend to enjoy in terms of bringing the required economies of scale.

Very clear qualitatively. Just a small follow-up quantitatively.

Out of this 50% cost base, how much will grow detached from the growth of the business and how much is tied to the growth of the business?

That is actually quite variable depending on year-on-year, to be fair, because what happens is in some years wherein you have a ramp-up in the cost, your variable cost would go up because you would have higher pre-operating cost expense base which would come in. Like I said, the limited fixed amount would be more in terms of your occupancy and a certain amount of manpower that you require to ensure that operations are running in the way that is expected.

Got it, sir. Thanks a lot for the clarification.

My question is a couple of airport going to expire, and considering the cost is going to increase, how we are going to retain the margin of that airports?

Hi, Sumant. I think the cost increase which you're mentioning, I think relates more to when a new contract starts.

Because we've had a lot of new build, the cost increase actually plays out at that point in time. When we start these new units, you have this cost increase, and especially in a greenfield probably plays out more because in a greenfield airport passenger traffic takes a bit of time to come.

Prime example being Noida Airport started. We have teams there providing the services.

You have pre-operating cost because those teams need to come in advance before sales are even there, right? They have to go for training.

For many of the brands, even 2, 3 months of training in advance, leadership teams going in, travel, various pre-operating expenses. Those tend to be quite larger, and yes, we've been through in a positive sense a strong new net gain, new opening cycle.

That has played out in the cost, which will be basically our earnings potential for the period ahead. It unlocks that.

At the same time, to your question that when things go for expiry and they get renewed, there yes, there would logically be some cost escalation again at that point in time, because there would be new brands we change. Now, yes, in renewals, the changes you do maybe more limited than a fresh construction, but yes, you'd still have some brand changes what's relevant there, some assets you would refresh.

There would be some level of reset and some level of cost setting in, but that again would probably normalize probably on the lower end of that 12-month scenario is the way we see it playing out.

When we talk about that this time we have a top-line growth of 20% plus and EBITDA growth of 11%, our more than 9% margin has gone because of higher employee cost and other expenses because of commissioning of new sites. Is that big impact because of Noida or any other places?

We had mobilization in Noida, we had mobilization in Cochin as well. We had two airports that came in place at once in here, plus we had a lot of new units coming in line in Delhi as well, in new terminals that were there.

For example, we had presence in Delhi Airport, but with a set of new outlets. It's a combination of when a greenfield happens, it is much larger, because you need a full set of teams.

Even in existing terminal when you have a large set of outlets coming in, the teams for those outlets, for example, you need to recruit in advance and train for those outlets. Now if it's 1, 2 outlets here or there, it gets subsumed in numbers, but when you have a large opening cycle that plays out, that tends to bunch up and get a number like you'd see an impact on the EBITDA as we had.

That obviously has played out in our numbers as well.

Any inflation impact because of change in labor code, and also other expenses increase, any other bifurcation can you do that? Can you tell us what are the other factor apart from that the other expense increased significantly?

On the other expenses, the labor code we roughly have around 5,000 plus employees and majority are on company roll. The impact of the new labor code is very minimal for us, which we had clarified earlier, and it was below 8 to 10 CR kind of a number from that perspective, which we had clarified.

Other than that, there isn't any other jump up in the cost except annual increments and the higher pre-operating cost for the ramp-up of units that happened for Cochin, Noida, as well as Delhi units, which we are in the process of commissioning or ramping up as we go along. It will equate or be in line over a period of time as those units start performing.

Okay. Thank you so much.

Hi, sir. Thank you for the opportunity and congratulations on a great set of numbers.

Sir, I just wanted to know, we see a small moderation in our contract renewal rate. It used to be approximately 94% and now it's around 92%.

Is this just an adjustment made for Delhi Terminal 3 or has any of the concession expired which we did not renew?

Hi, Sanjay. Thanks again.

In terms of that number, if I recollect, just try to put while probably it was nothing material in there, but if I remember right, it was some highway outlets which part of our strategy which was some we entered earlier, which we didn't see an intention to renew. They were not because our strategy is now to go with the WSA larger investments.

We had done a few pilots on the highway, a bit of smaller size, those outlets we didn't look at renewing. I think that's why you've seen that marginal moving in that number.

That's been I think 94% to 92%, that's the right numbers, but it has been probably because of the mathematics around those highway sites.

Okay. Sir, my another question would be since you already alluded to that, couple of manpower and operating cost has been done for the last, we have won for four airports and all of them and the Bhogapuram is also coming up as you mentioned on the 17th August.

The cost has been escalated. The margin has been coming forward in the couple of quarters back.

Maybe H2 onwards the margin will start kicking from there? Is the understanding correct?

Sanjay, if I understood your question right, just tell me at the end if I got it, but generally our margin on most fronts I think we've been around the ranges we've said. There may be some level in terms of the, especially things around the employee piece, which logically are the ones you need to get in advance, in terms of you have your team members, they train.

There have obviously been one-time impacts currently. Even say in the backdrop of a challenging operating environment because of the Middle East, we've still I think kept quite a bit of discipline around costs, and you can see that across coming in various of our other cost lines as well in the ultimate delivery in the numbers.

Yes, compared to what we normally have seen, you've seen that a little bit of extra cost coming through in a few lines, like you said, that impacts our EBITDA margin, largely I think it was labor, which was the one that gets affected because of the pre-op and the advance cost that you need to take when you're opening new units.

Sir, my last question would be regarding, you are now alluded to the opportunity which is highways and all that. For the last few quarters you've only said that it's a long-term play, but now when I see you have started alluding that you are looking forward to this opportunity quite robust.

Is there government policies has been changing? Are we changing some sort of strategically?

What is the strategy you are looking forward in that space? Can you a bit louder on that side and explain more into that, because until now it was just an opportunity we were figuring out and we are saying that it's a 3 to 5 year down timeframe.

Currently what I able to understand is we are aggressively looking into that highway space more. If you can explain me more into that.

Sure. I can talk a bit about that, but just as a bit of a context, I think as a general business, I think yes, we look at opportunities, we would obviously look at it aggressively, but at the same time, cash generation, return is top of agenda.

I think in any method, we won't compromise that. That's been something I think the USP of the TFS business over the last decade and a half.

That's been the way we've run the business, and that's where we achieved the financial results plus cash balance, no debt on there as well on our balance sheet. That's the approach.

Coming to highways particularly, our plan is obviously from a company point of view, I do talk about future opportunities as well, and I think rightly we've always stressed that highways are probably what airports were when we entered in 2008, 2009. Then there was a journey.

Obviously we're talking about a time almost 18 17, 18 years later today where we sit. I think highways are at the point where now government investment is coming, expressways are being built, these wide multi-lane expressways, access-controlled, limited developments for retail, F&B through these wayside amenities, WSAs, and there's about 1,000 wayside amenity plan already announced by the government.

That is to come. What I've been announcing is that we will be targeting those as those come online, and that's basically a future opportunity.

While I do talk and give a sense of the opportunity, obviously there's a lot of work going on on the back end and we're doing a lot of work, analysis, engagement, talking with potential partner brands, landlords, companies out there, oil marketing companies, you'll see some press around that as well, and so all of that is going on. Like I said, as we roll out, it's not something that we say we need to do immediate.

We are looking at this as a medium-long term with a very clear condition that financial return, our benchmarks, we need to be in line with those. Therefore, you'll see that happening in a calibrated manner to unlock a long-term opportunity, rather than something we want to say we want to jump into on an absolute immediate basis.

Thank you, sir. All the best.

Thank you.

Thanks, Sanjay. Thanks.

Hi, sir. Thank you for the opportunity.

Am I audible? Hello?

Vansh, hi. Clear.

I can hear you. Yes,

thank you, sir. Just a couple of questions on margin.

Given that some of our airports, like the Delhi T3 airport, they might be moving towards the JV, and given that Delhi and Mumbai airports are perhaps the two biggest airports in the country and they should be contributing to a large part of our revenue and margins, I wanted to understand is the EBITDA margin profile similar for our other airports which is beyond Mumbai, Delhi, and Bangalore? Essentially, will our EBITDA margin profile be the same if our Delhi Airport were to move towards JV for the other airports?

Hi, Vansh. Vansh, just two things.

One, just a point of clarification. Delhi T3 was already operating in a joint venture.

Currently that joint venture was in the form of an SPV and that contract expires. The plan is we will be bidding through another joint venture with GMR, that is a long-term joint venture, which is not in the form of an SPV.

That's been one which we've been calling out since a while. In terms of margin profile, I think irrespective it's a joint venture or it's direct concession, the nature of that is quite similar.

I think that plays out. I think what's more relevant is if it's new build and starting to normalize takes a bit of time, irrespective it's a JV or non-JV.

I think that's the more important criteria that as contracts mature, profitability levels start kicking in more and more, because you're running it well, you understand the market, you built all the changes in, teams also clued on. Ultimately, it's a human business selling.

All of that plays out. I think the timing is a more relevant point that plays out than say in the type of entity it operates in.

Got it, sir. Just for clarity, you're saying that the Delhi Airport was already operating under the SPV, it was not a part of your consolidated revenues as in the consolidated revenue of the company reports?

No, Delhi T3 was part of it. It was a JV.

In the JV historically we had a majority share, we used to consolidate it. In the new SPV, our shareholding with GMR is 30%.

Therefore, that doesn't get consolidated going forward. It would still be a JV, but it would be part of our profit pick-up that would come through.

Got it, sir. It's not the case that we have lower average selling prices across our airports other than Delhi and Mumbai, and so margins would drop for other airports, right, even if this were to move to a JV wherein we have a lower share of the profits and the revenues?

Yes, the margins won't drop. You just have your share of the rev share of the number is what it is.

Obviously, I think the tender, for example, is for a larger set of outlets than what we currently had in T3. That's been a strategy we've called out always plays out, right, when you operate directly or something you have a limited set of outlets.

The joint venture when these larger tenders come in, it's sizable and much more in terms of scale than what the earlier opportunity was.

Right. The ASPs also remain broadly along the same level across all our airports, sir?

Average selling price.

Just clarify, between JV and as it moves, that would be similar because the same way of operating. Yes, across airports, just logically, the larger airports, metros, just because of nature of travel, international travel, propensity, per capita income in those cities, spends would be a bit higher, right?

That's why you see brands today you go to Delhi Airport T1, you see a Gordon Ramsay there. You go to Mumbai, you're seeing a Wagamama in the airport.

Automatically, those spends in those airports, because the premium offers, type of brands, the absorbability, the spends per consumer would be higher in that sense.

Right, sir. Understood.

Yeah. Just one more question from my end.

All of our concession agreements, are they baked-in step-ups to the minimum guaranteed rents that we pay to the landlords? Or is that the rents, the percentage of revenue, both the fixed part as well as the variable part, that gets renewed only after the concession agreement expires?

Yes, our contracts are largely of the nature of a minimum guarantee and/or a revenue share, whichever is higher. That's the majority of the contracts how

they

sit. From our performance, because we've been there, I think we run well, you've seen the numbers, we tend to always go above the minimum guarantee.

That's predominantly, I would say, probably across all the real estate, we're running in that manner where we're paying the revenue share amount. The airport's also happy because you're beating the minimum guarantee they targeted and you're delivering a higher revenue share, which is where a partner like us comes in, right?

We don't just deliver the MG. Airports would look us look at us as a partner who gets the right brands, the right experience, and actually overdelivers in terms of sales performance, and therefore the airport earns more from the incremental revenue share that we can drive.

Right, sir. My question was largely whether that minimum guarantee that we

Ma'am, it's just a follow-up to my previous question. Please.

Sir, my question was largely whether the minimum guarantee that we give to all these airports as well as the revenue share percentage that we give to these airports, are there yearly step-ups to these percentage of revenue share every year, or do these percentage shares, they get revised only upon contract renewals?

There's normally the contracts, every airport would have a differing way. I would say there's one set manner.

MGs normally would have an escalation. Revenue shares potentially could be a scenario where you have a revenue share in some contracts maybe the same amount, some may have marginal escalation, but not really meaningful, like you don't see any sort of a real jump-up that comes in where there's a meaningful jump there.

In terms of what plays out, more than that is probably the maturity of the contract more than covers that. As the contract matures and you get a profitability, even if there are certain contracts may have revenue shares logically of small jump here or there, 0.1%, 0.2%, or something of that nature, it doesn't really meaningfully influence the return benchmarks in the later years, because the upside on maturity performance, when you get longer term, the profitability as traffic kicks in, the same assets are performing better, that aspect actually flows in much stronger.

Understood, sir. Hypothetically, what, the landlords can revise the revenue share percentage every year with you?

No, it's contractually built in. That's what I mentioned.

Everything is built

in. They can't revise it every year.

As long as the contract is valid, the revenue share percentage as well as the minimum guarantee, they remain stagnant. Of course, the minimum guarantee has some step-ups every year, but the revenue share, that percentage remains constant throughout the life of the contract.

That's right.

Understood, sir. Right.

That's all from my end. Thank you so much for all that clarity, and wish you the best of luck.

Thank you.

Thanks a lot.

Great. Thank you to the ICICI Securities team for hosting us, and we appreciate all of you taking the time out today to join us for this earnings call post our Q1 results.

If you have any further queries, please feel free to reach out to our investor relations team. A happy Independence Day in advance to all my fellow Indians.

Thanks a lot.