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Thomas Cook India announced the demerger of its resorts and resort management business into Sterling Holiday Resorts Ltd (SHRL) on 20 March. Investors were not enthused, and the stock has slipped 7% since then, taking its 1-year tally to -30%.

To be sure, the YOLO (you only live once) sentiment during the pandemic sent travel and hospitality stocks soaring amid expectations of high growth, driven by ‘revenge travel’. Thomas Cook’s shareholders were no different and had seen their wealth quadruple in just about a year since March 2023. But soon, the realities of the B2B-driven, low-margin business caught up with sentiment, sending the stock down more than 60% from its July 2024 peak.

While the demerger hopes to unlock value with a higher strategic focus, investors need tangible progress on the ground before sentiment can turn around. Let’s discuss this divergence—the lofty promises from the demerger vs the on-the-ground realities for Thomas Cook.

SHRL will eventually be listed on the exchanges. Shareholders will receive 0.81 shares of SHRL for every share of Thomas Cook. The company also plans a reverse split, in which four shares of Thomas Cook will be consolidated into a single share. Three dormant and non-operating subsidiaries will also be merged to reduce administrative costs.

The goal is for the demerger and restructuring to unlock value for Thomas Cook shareholders by streamlining the capital structure and improving earnings per share, while SHRL will get the strategic and operational focus required to scale in India’s growing hospitality sector. The management also hopes to “attract differentiated investor cohorts for each business segment”.

As India’s largest integrated tourism and travel company with a global footprint spread over 28 countries, Thomas Cook derives almost 80% of its revenues from travel and related services. While technically, resort management is also a travel-related service, let’s discuss how the company demarcates its business segments.

The company owns a portfolio of 16 brands, with travel and related services holding the likes of SOTC, TCI, Sita, Asian Trails, and Allied-t-pro. SOTC was established in 1949 and caters to omnichannel travel and tourism. Travel Corporation (India) Ltd operates the Sita and Distant Frontiers brands, and offers tailor-made travel and related services to India and neighbouring countries, as well as private safaris in Africa. This is the company’s largest segment, as well as its fastest-growing one, with 9% year-on-year growth in 9MFY26.

Its resort-management business, categorized as leisure hospitality, is relatively small. SHRL boasts of over 72 resorts, hotels, and retreats across 62 locations in India, of which six are owned and/operated under the ‘Nature Trails’ brand. But the segment accounts for just over 5% of Thomas Cook’s overall revenues. Another 10% of revenues come from DEI (Digiphoto Entertainment Imaging), which deals in photography and videography services at tourist attractions.

While travel and related services drive Thomas Cook’s revenues, the segment is largely B2B. Destination Management Services (DMS) which utilizes its extensive network of local ground-handling partners to provide specialized, on-ground services for travellers through business partners, and corporate MICE (meetings, incentives, conferences, and exhibitions) together account for 80% of the segment’s revenues. This accords the company little pricing power, despite being a market leader in the space.

The next largest segment—digital imaging solutions—finds itself in stiff competition with a large unorganized market, and has also ended up commanding low margins. Result? The lion’s share of Thomas Cook’s revenues is margin-dilutive, with Ebit margin at a meagre 3-4%. Despite a decent 7% revenue-growth clocked in 9MFY26, the company’s Ebit remained flat year-on-year. This has been investors’ primary pain-point.

And this is precisely where its leisure hospitality and resorts segment can come to the rescue. Primarily operating in the international B2C space, its Ebit margin at 30% is second only to the financial services segment. Sure, it is small, and has grown at just 3% year-on-year in the nine months ending December 2025. But if the demerger of SHRL is executed successfully and manages to draw in focused investors, the segment can scale quickly.

Thomas Cook India’s erstwhile British parent had infamously gone belly up back in 2019 under the weight of enormous debt. While the Indian arm had been a legally separate entity since its acquisition by Canada’s Fairfax Financial Holdings in 2012, its starkly different debt-profile is worth noting.

The Indian arm has maintained negative net debt over the years, allowing operational flexibility while leaving room for expansion without stressing its books. Even the typically capital-intensive resorts business has pivoted from a timeshare model to an asset-light approach. Only 16 resorts in its 72-resort ecosystem are owned by the company, with the rest operated in partnership with third parties. This has allowed faster and more flexible expansion in an increasingly favourable industry climate.

As corporate travel resumes prevalence and India emerges as a global event destination with rising inbound tourism, Thomas Cook’s key segments can be expected to ride these tailwinds. Premiumization among Indian travellers can help expand outbound travel and margins, while growing digitalization can drive deeper penetration.

Immediate tailwinds are prevalent as well. In the FY26-27 Union budget, the government rationalized TCS on overseas tour packages from 5-20% all the way down to 2%. This is likely to help Thomas Cook’s fortunes during the subsequent summer travel season. The company also expects reduced weather-related headwinds, 30% more Saya/auspicious dates, and the opening of new jungles to have driven industry-growth faster in Q4FY26.

It has been launching new resorts to capitalize on these tailwinds. The December quarter saw new resorts in Puri, Gangtok, Rishikesh, and Goa, and five more resorts have been launched since then. It has built up a pipeline of 21 additional resorts and over 1,000 new rooms to take its total resort count to 93, and room count to 4,666 in 2026, further cementing its lead in the resort-management industry.

And it is never just about quantity in the hospitality sector. Despite aggressive expansion, quality has not taken a hit. Revenue per available room increased 14% year-on-year during the December quarter with a healthy ~30% Ebit margin, and margins are expected to expand further on the back of higher operating leverage and maturing managed resorts. TripAdvisor rating at 4.61, up from 4.55 last year, also inspires confidence.

As India’s tourism sector grows from strength to strength, Thomas Cook can claim a front-row seat as the market-leader. That said, competition in the fragmented industry can slow down growth and compress margins, especially with proliferation in online aggregators. Ongoing geopolitical conflicts can play spoilsport too. But the company enjoys a competitive edge as an asset-light and diversified travel platform.

Against this context, the demerger can turn out to be exactly what the doctor ordered—separation of its smaller but high-margin resorts business can be expected to bring in the superior strategic and operational focus required to expand to its full potential. Sure, the company’s debt trajectory will need to be monitored, particularly through its expansion plans. But the stock’s valuation has moderated from a peak of 72x in October 2023 to below 18x, leaving room for some slip-ups along the way.

For more such analysis, read Profit Pulse.

Ananya Roy is the founder of Credibull Capital, a SEBI-registered investment adviser.

Disclosure: The author does not hold shares of the companies discussed. The views expressed are for informational purposes only and should not be considered investment advice. Readers are encouraged to conduct their own research and consult a financial professional before making any investment decisions.

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