IPO Note :Travel Food Services Ltd by ARETE Securities Ltd
Travel Food Services Ltd. (TFS) is a leading player in the high entry-barrier airport Travel Quick Service Restaurant (QSR) and lounge industry. It has a strong presence across Indian airports and select international locations, operating an extensive network of QSRs and lounges. TFS distinguishes itself through a diverse brand portfolio, comprising both partnered and inhouse offerings, and its operational expertise in the demanding airport environment. The company enjoys strong relationships with airport operators and maintains a robust financial position, reinforcing its leadership in both the travel food services and lounge segments.
Investment Rationale
Diversified Brand Portfolio in Travel QSR:
As of FY25, a robust portfolio of 127 brands-spanning domestic, international, and proprietary labels-positions the company as a leader in airport food and beverage operations. Strategic brand placements, guided by technical evaluations of site suitability, optimize customer reach and operational efficiency. Sixteen years of airport expertise underpin seamless execution, fostering a 94% concession renewal rate (8-9 years) among multi-port operators. This high renewal rate reflects strong airport authority partnerships, ensuring long-term revenue stability. By aligning brand offerings with airport partners' objectives, the company strengthens its competitive edge in the travel QSR market, leveraging operational excellence to drive sustained growth.
Ease in International Expansion:
Backed by its promoter, SSP-a UK-based global leader in travel F&B with a 49% pre-IPO stake-the company gains unparalleled access to international expertise. Operating across 38 countries, SSP provides proven operational practices, advanced technology, and established airport relationships, simplifying global market entry. This partnership fuels expansion in the lounge segment under the proprietary "ARAYA" brand, targeting high-growth APAC and Middle East markets (excluding Egypt). SSP's franchise fee for leveraging ARAYA's branding and lounge expertise creates a mutually beneficial synergy. This strategic alliance enhances scalability, streamlines international operations, and positions the company as a credible global player in travel F&B.
Expansion into Highway Travel QSRs:
India's expanding expressway infrastructure unlocks new growth avenues, with over 1000 wayside amenities (WSAs) planned by 2029. The company is capitalizing on this opportunity by developing innovative QSR formats and multi-brand food courts at 29 operational highway outlets, offering diverse dining options and high-quality amenities. Drawing on 16 years of airport operational expertise, this pivot ensures proficiency in the highway segment. By adapting its proven capabilities to meet evolving consumer demands, the company is well-positioned to dominate India's highway travel QSR market, complementing its airport dominance and driving diversified revenue streams for long-term growth.
Outlook & Valuation
As a market leader in Travel QSR and airport lounges, and benefiting from a first-mover advantage, the company is well-positioned for sustained growth. Increasing airport infrastructure, fleet expansions, and rising passenger arrivals will boost its QSR and lounge segments. Additionally, the largely untapped road-based QSR market, supported by government-backed WSA site awards, offers further growth potential. With promoters like SSP providing global expertise and K.Hospitality's established reputation and cost efficiencies, this zero-debt entity is primed for success. Valued at an FY25 EV/EBITDA of 16.58x at the upper price band of Rs.1,100 on post-issue capital, it shows strong growth prospects in the coming years. We recommend SUBSCRIBE for long-term investors.
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