Travel Food Services - India's Airport F&B Leader

Introduction: India's Aviation Growth Story

India's aviation sector is experiencing structural growth, with air travel per capita at just 0.27 trips compared to China's 0.81 and the USA's 5.58. This gap represents significant runway for expansion as economic fundamentals improve.

Key Growth Drivers:

• Infrastructure expansion: 138 operational airports (Aug 2025) projected to reach 350 by 2047; ~2,400 aircraft on order (3x current fleet)
• Economic tailwinds: GDP per capita crossing $2,800 (FY25), rising disposable incomes, and growing middle class
• Democratization of air travel: Low-Cost Carriers now represent 75% of market share (vs 66% in FY16), making air travel accessible to millions of first-time flyers
• Structural shift: As incomes rise, the opportunity cost of 16-36 hour train journeys becomes irrational—air travel shifts from luxury to necessity for business and family occasions

Projected Growth: Domestic aviation at 9.3% CAGR (CY24-29), significantly outpacing GDP growth.

Why This Benefits Airport F&B Operators

More air travelers directly translate to captive consumption opportunities:

• Extended dwell times: Passengers arrive 2-3 hours before flights for check-in, security, and boarding—creating F&B consumption windows
• Captive post-security audience: Limited alternatives once passengers clear security checkpoints
• Premiumization: Travelers choosing air over rail demonstrate willingness to pay for time/comfort—higher propensity for airport F&B spending
• Lounge economics: 70-80% of lounge revenue is B2B-funded by banks (ICICI, HDFC, Visa, Mastercard) offering co-branded credit card benefits—creating negative customer acquisition cost for operators

Travel Food Services: The "Toll-Bridge" on India's Aviation Highway

Travel Food Services (TFS) is India's leading operator of F&B outlets and premium lounges in the travel infrastructure sector. It acts as a "one-stop-shop" for airport operators, managing the entire food and hospitality ecosystem within terminals.

Scale & Reach:

• 464 Travel QSR outlets and 37 lounges across 18 airports in India, Malaysia, and Hong Kong
• System-wide presence at 14 of top 15 Indian airports
• 135+ brand portfolio spanning in-house, regional, and international concepts
• Select highway sites in exploratory phase

Market Dominance:

• ~26% market share in Indian airport QSR sector
• ~45% market share in Indian lounge sector
• Strategic JV partnerships with Adani Airports (Semolina Kitchens) and GMR (Hyderabad Lounge)

Business Model: TFS operates on a concession-based model, functioning as a master concessionaire at most airports. The company invests in fit-outs and equipment while airports provide infrastructure. This asset-light approach delivers:

• 39-40% ROE and 41-42% ROCE
• 30%+ PAT margins and 38-40% EBITDA margins
• Zero debt with ₹7.5bn cash (as of Sep 2025)

Revenue Concentration:

• ~96% of revenue from airport operations (Q3 FY26: ₹4,562m revenue, +18.3% YoY)
• Top 5 airports contribute 86-90% of total revenue
• Highway and international operations remain nascent (~4% combined)

This concentration creates both opportunity and risk: undiluted exposure to India's aviation structural growth (0.27 → 0.81+ trips per capita) but with 100% correlation to sector performance.

How TFS Captures the Aviation Growth Story

1. Volume Growth from Passenger Traffic

The Math:

• Every 1% increase in passenger traffic ≈ 1% revenue growth for TFS (all else equal)
• With 9.3% aviation CAGR projected, TFS has a built-in growth engine
• System-wide presence at 14 of top 15 Indian airports means TFS captures network-wide traffic growth

The "LFL Delta" – TFS's Secret Weapon:

Q2 FY26 demonstrated TFS's operational moat:

• Passenger traffic: -3.5% YoY (external shocks)
• LFL growth: +3.8% consolidated, +9.2% system-wide
• ~10% outperformance gap driven by:
  • Penetration improvements: More travelers buying from TFS outlets (brand refresh, menu innovation)
  • Premiumization: Celebrity chef concepts (Gordon Ramsay Street Burger, Wagamama) commanding higher ticket sizes
  • Throughput optimization: 5-minute quick commerce menu reducing wait times, increasing conversions

This is the moat in action: TFS grows revenue faster than passenger traffic through operational excellence, brand depth, and pricing power. This single metric justifies paying a premium multiple.

2. Infrastructure Expansion = Automatic Growth

New Airport Contracts (Last 12 Months):

• Cochin International: 11 QSR outlets + 1 lounge (launching January 2026)
• Noida International Airport: Greenfield project, TFS awarded travel QSR + lounge contracts
• Navi Mumbai Airport: Awarded; premium catchment serving Mumbai metro
• Delhi T2 Reopening: 14 units operational under 3-year concession

The Concession Lock-In:

Airports prefer single "master concessionaire" managing entire F&B ecosystem:

• Strategic JVs with landlords create near-insurmountable barriers:
  • Semolina Kitchens (25% TFS, 75% Adani Airports): Mumbai, Ahmedabad, Lucknow, Mangalore – 15+ year contracts
  • GMR Hyderabad Lounge (30% TFS, 70% GMR): Hyderabad Airport
• 93.9% historical contract retention rate validates stickiness
• "Right to Win" for greenfield projects due to track record and JV partnerships

The Risk: Lose Delhi T3 renewal (FY26) = 15-20% revenue impact overnight. But JV structure with GMR/Adani makes displacement highly unlikely.

3. Premiumization of Travel Consumption

Behavioral Shift:

• Pre-pandemic: Airport F&B = expensive necessity
• Post-pandemic: Quality, experience, convenience valued; willingness to pay for premium

TFS's 135+ Brand Portfolio Strategy:

Regional Customization:

• South Indian concepts in Chennai/Bangalore (A2B, Hatti Kaapi, Idli.com)
• North Indian in Delhi (Dilli Streat, Bikanerwala)
• International brands at metros (Wagamama Mumbai debut, Gordon Ramsay Delhi T1)

4. The Negative-CAC Lounge Goldmine

The Ultimate Business Model:

• 70-80% of lounge footfall funded by banks and card networks (ICICI, HDFC, Visa, Mastercard) who pay per-visit fees to TFS
• TFS earns revenue without customer acquisition cost
• EATS Platform moat: Proprietary lounge access management system with direct bank/card integration
  • Creates switching costs for financial institutions
  • Potential to license to third-party lounges (though management says "too preliminary to quantify" – don't pay for vapor)

Credit Card Penetration as Tailwind:

India's credit card market is growing rapidly—penetration rising from 5.5% (FY20) to 8.2% (FY25) with 12%+ projected by FY30. With 60+ million cards in circulation and banks competing on travel perks (HDFC Infinia, ICICI Sapphiro, Axis Magnus), complimentary lounge access has become a key differentiation tool.

This creates a behavioral tailwind for TFS:

• Flight preference: Free lounge access can tip the decision toward flying vs. alternatives
• Early arrival: Travelers with lounge access arrive 2-3 hours early to maximize the perk—extending dwell time and consumption windows

As banks continue competing on travel benefits, TFS's lounge business benefits from credit card industry growth without bearing customer acquisition costs.

Lounge Market Growth:

36+ lounges operational (India, Malaysia, Hong Kong) with expansion pipeline tied to new airport contracts.

5. Adjacent Growth Vectors: The Reality Check

Indian Expressway Travel QSR Market:

The Honest Assessment:

• TFS has opened ZERO expressway outlets at scale
• Management explicitly cautious: "Won't compromise return metrics," "selective exploration"
• This is a 5-10 year story, not 2-3 years – don't pay for it in bull case unless you see 20+ outlets by FY28

International Lounge Expansion:

• SSP Group backing (50.1% stakeholder, FTSE 250): 600+ brands, 38 countries
• Current footprint: 2 international lounges (Malaysia, Hong Kong) after 12+ years of SSP ownership
• Reality: If this were truly strategic, why so slow? Token presence, not aggressive expansion.

Rail/Metro:

• "Historical presence," "limited disclosure" = sub-5% revenue if any, non-material

Bottom Line on "Diversification": TFS is NOT a diversified travel F&B operator. It's a pure airport play exploring adjacencies that haven't proven economics yet. Invest accordingly.

The Numbers: Financial Performance Reflecting Quality

Q3 FY26 Snapshot (Oct-Dec 2025)

¹ Adjusted for Semolina Kitchens (Adani JV) deconsolidation effective Oct 14, 2024

Key Highlights:

• Balance Sheet: Zero debt; ₹7.5bn cash (up from ₹6.3bn in Mar 2025)
• Capital Efficiency: ROE ~39-40%, ROCE ~41-42%
• H1 FY26: System-wide sales +22.4% YoY (LFL +10.4%, net contract gains +10.0%)

Why These Numbers Matter

1. Resilience Proof (Q2 FY26):

• Passenger traffic: -3.5% YoY → LFL growth: +3.8% consolidated, +9.2% system-wide
• Demonstrates pricing power, penetration gains, operational agility – the moat works even in downturns

2. Asset-Light, Cash-Generative:

• Concession model: Airport provides infrastructure, TFS invests only in fit-outs/equipment
• JV structure enhances ROCE: TFS contributes ~25% capex but earns management fee (1.5-2.5% of gross sales) + profit share
• 50 QSR outlets + 4 lounges mobilized in last 12 months without straining balance sheet

3. Margin Quality:

• Gross Margin: 80-82% typical; Q3 FY26 improved to 83.9%
• EBITDA Margin: 38-40% range maintained despite new unit ramp (typically margin-dilutive first 12-18 months)
• PAT Margin: 30%+ – management focuses on "PAT, not EBITDA optics"

Comparison vs. Alternatives:

TFS offers best-in-sector economics (39% ROE, 39.7% EBITDA margin) but with 96% concentration risk.

Valuation: What Are You Paying For?

Current Market Data (as of Feb 15, 2026)

What the Market is Pricing In

At ₹1,171 (P/E 36.4x), the current valuation implies:

• 18-20% PAT CAGR for next decade (achievable if aviation grows 9%+ and LFL sustains 8-10%)
• Successful execution on new contracts (Noida, Navi Mumbai, Cochin scaling)
• EBITDA margins sustained at 38-40% despite competitive pressures
• New verticals contributing by Year 5 (expressway, international) – currently unproven

DCF Fair Value Analysis

Base Case Assumptions:

• Aviation traffic CAGR: 9% (in-line with guidance)
• LFL growth: 8-10% (penetration + modest pricing)
• New contracts: Noida, Navi Mumbai scale over 3 years; expressway pilot (20-30 outlets, not 100+)
• EBITDA margin: 38-40%
• PAT CAGR: 18% for 10 years
• Terminal growth: 6%, Cost of equity: 12%

Base Case Fair Value: ₹1,710 (46% above current price)

• Assumes no material expressway/international contribution by FY30
• Pure airport play achieving 18% PAT CAGR via traffic growth + LFL + new contracts

Bull Case (25% PAT CAGR): ₹2,885 (146% above current price)

• Requires expressway scaling to 100+ outlets, EATS monetization, international expansion
• Lower probability scenario given lack of execution proof to date

Bear Case (12% PAT CAGR): ₹1,068 (9% below current price)

• Could be triggered by Delhi T3 loss, traffic disappointment, or margin compression
• Downside cushioned by cash position (₹7.5bn) and contract retention history

Probability-Weighted Fair Value

Variance from Current Price (₹1,171): +53%

This probability-weighted analysis suggests the market may be undervaluing TFS relative to its base case fundamentals, though the wide range (₹1,068-₹2,885) reflects significant uncertainty around execution of new contracts and adjacent growth vectors.

Conclusion

Travel Food Services has established itself as India's dominant airport F&B and lounge operator, commanding approximately 26% of the airport QSR market and 45% of the lounge sector across Indian airports. The company operates on a concession-based model that delivers 39% ROE and maintains PAT margins above 30%.

Key Business Characteristics:

• 96% revenue concentration in airport operations across 464 outlets and 37 lounges
• Strategic JV partnerships with Adani Airports (Semolina Kitchens) and GMR (Hyderabad Lounge) providing long-term contract visibility (15+ years)
• 135+ brand portfolio spanning budget (Cafeccino, Idli.com), mid-tier (Wow! Momo, A2B), and premium segments (Gordon Ramsay, Wagamama)
• Asset-light model with zero debt and ₹7.5bn cash position
• Historical contract retention rate of 93.9%

Operational Performance:

TFS has demonstrated the ability to grow revenue faster than passenger traffic through operational execution. In Q2 FY26, despite passenger traffic declining 3.5% YoY due to external shocks, the company achieved Like-for-Like (LFL) growth of +3.8% consolidated and +9.2% system-wide, driven by penetration improvements, premiumization, and throughput optimization.

Industry Context:

TFS's business performance is directly tied to India's aviation sector trajectory. With air trips per capita at 0.27 (compared to China's 0.81 and USA's 5.58), and domestic aviation projected to grow at 9.3% CAGR through 2029, the company operates within a structurally expanding market. The shift from rail to air travel, driven by rising GDP per capita ($2,800+ in FY25) and increasing opportunity cost of time, creates sustained demand for airport infrastructure services.

Adjacent Growth Vectors:

Expressway and international operations remain nascent, contributing approximately 4% of combined revenue. Management has maintained a selective expansion approach, prioritizing return metrics over aggressive scaling. The Indian expressway travel QSR market is projected to grow from ₹15bn (FY24) to ₹220-240bn (FY34), though TFS presence remains in pilot phase with no large-scale rollout to date.

Financial Strength:

The company's balance sheet reflects a cash-generative model with no debt, ₹7.5bn in cash reserves (as of Sep 2025), and strong capital efficiency (41-42% ROCE). Q3 FY26 performance showed revenue of ₹4,562m (+18.3% YoY) with EBITDA margins sustained at 39.7%.

The Concentration Reality:

TFS is fundamentally an airport-focused operator, with 96% of revenue derived from airport operations. The top 5 airports contribute 86-90% of total revenue. This concentration creates operational focus and undiluted exposure to aviation sector performance, while also introducing binary contract risks (such as the upcoming Delhi T3 renewal in FY26, which represents 15-20% of revenue).

Disclaimer: This analysis is for educational purposes only and not investment advice. Conduct your own due diligence or consult a financial advisor before making investment decisions.

Last Updated: February 15, 2026