Travel Food Services IPO is ready for boarding. Is this your destination for returns?

Founded in 2007 as Bombay Pure Foods Pvt. Ltd, the company now commands a 26% share in India’s travel QSR market and has a 45% share in premium airport lounges across 14 major Indian airports, including Delhi, Mumbai, and Bengaluru. It also has a presence in international markets like Malaysia and Hong Kong.

Backed by global travel retail major SSP Group and India’s largest privately held food and beverage player, K Hospitality Corp, this travel dining powerhouse is gearing up for a ₹2,000 crore initial public offering, entirely an offer-for-sale by the Kapur Family Trust, one of the company's promoters. 

Could this be your chance to own a stake in India’s fast-growing aviation-linked consumption story?

Also Read: FY25 dividend payouts: Cash-rich BFSI and IT companies dominate

Flying high on margins

While this travel QSR and lounge leader may trail larger QSR players in top-line growth, it leads the pack when it comes to profitability. Between 2022-23 and 2024-25, TFS's revenue recorded a compound annual growth rate (CAGR) of 25.9% slightly behind KFC and Pizza Hut outlet operator Devyani International Ltd’s 28.9% and Domino's Pizza and Dunkin' Donuts outlet operator Jubilant FoodWorks Ltd’s 26.8%. 

However, where it truly stands out is in margins. In the last three years, TFS delivered an impressive median Ebitda margin of 40.8% and a profit after tax (PAT) margin of 21.6%. In comparison, Jubilant reported Ebitda and PAT margins of 20.6% and 5.5%, while Devyani lagged further behind at 19.1% and 2.8%, respectively. Ebitda is short for earnings before interest, taxes, depreciation, and amortization.

“Our performance has been quite steady, both annually and quarterly," said Varun Kapur, managing director and chief executive, in an interview with Mint. “Unlike other QSR players, our exclusive focus on the aviation sector gives us a premium consumer base—business and leisure travellers with higher spending capacity—and drives stronger unit-level economics."

Highlighting the company’s strategic positioning, Bhavik Joshi, research analyst at INVASSET PMS, said: “Headline revenue may look flatter due to JV accounting (a method where companies report their share of profits from joint ventures instead of fully consolidating the revenue, promoting better capital discipline), but PAT is increasingly driven by recurring profits from strategic locations with high footfall." 

“The IPO gives investors exposure to a dominant, cash-generating, asset-light operator embedded in India’s airport ecosystem," he added.

Also Read: PSUs show dividend fatigue as payout ratios hit decade's low in FY25

The company also benefits from minimal debt and strong cash flow generation. Borrowings dropped to ₹37.5 crore in 2024-25 from ₹114.8 crore in 2023-24. Operating cash flows rose 46% year-on-year to ₹514.8 crore, helping fund expansion internally.

Despite the IPO being a full OFS, Kapur said the company has no funding constraints. “We have over ₹600 crore in cash, and our capital needs are covered through strong internal accruals," he added.

Risk radar

However, not all clouds are clear. TFS operates in a highly concentrated environment, with 86-90% of revenue over the last three years coming from just five airports. Its fortunes are tightly linked to periodic contract renewals with airport operators such as Adani Airport Holdings Ltd and GMR Airports Infrastructure Ltd. These concessions often involve minimum guarantees, which can weigh on margins if traffic dips.

To address this, TFS has shifted from short-term contract models to perpetual JVs with major airport players. “Earlier, we formed SPVs (special purpose vehicles) for specific contracts. Now, the JV is permanent, winning larger contracts with strong top-line and bottom-line contributions," said Vikas Vinod Kapoor, whole-time director and chief financial officer at TFS.

“Moving to JVs with GMR and Adani shifts TFS from direct operations to profit sharing, boosting long-term margins but reducing near-term visibility," said Joshi. “While losing operational control may impact service consistency, structured governance can deliver higher ROCE (Return on Capital Employed) with less capital. Analysts must now assess growth using core Ebitda + JV profits—this isn’t value erosion but a margin-rich, capital-efficient model."

The company’s contract retention rate has been robust—93.94% since 2009—and it continues to expand, recently securing 11 new outlets in the Bengaluru Airport’s Terminal 2, according to an Axis Capital IPO note.

Still, another operational challenge looms: high attrition. TFS reported attrition rates between 58-66% over the last three years, though it remains within industry norms for travel QSRs.

“Despite the churn, the company hasn’t faced labour shortages, reflecting operational resilience," said Joshi. “But sustaining service quality at scale will depend on better workforce retention."

Further, at the upper price band, the company is valued at 40x FY25 earnings. While this reflects its robust margins and premium positioning, it leaves little room for upside if market sentiment turns cautious. The absence of fresh capital infusion also means growth will rely entirely on internal execution. “TFS’s valuation is justified when viewed through the lens of economic substance—strong cash flows, high-margin stability, and embedded optionality across its business model," Joshi said.

Also Read: Promoters pocket half of India Inc's massive dividend payouts despite sluggish earnings

Market momentum

Meanwhile, given that the industry tailwinds remain strong, its runway for expansion remains long. According to Crisil, India’s airport QSR sector is expected to grow at a CAGR of 17-19% between 2024-25 to 2033-34, reaching ₹170-180 billion. Meanwhile, the airport lounge segment, currently underpenetrated, is projected to grow even faster at 22-24% CAGR, touching ₹155-165 billion.

As of September 2024, Indian airports had an average of just 0.7 lounges per airport, far below global norms. Even major hubs like Delhi and Mumbai host only 8-10 lounges, offering ample headroom for premium service growth.

“Looking ahead, India is poised to be a major global growth story over the next 50 years, and aviation is set to play a central role in that. The past 7-8 years have seen strong momentum, and the next decade looks even more promising," Kapur said.