About the company:
Online travel booking aggregator EaseMyTrip.com is planning to raise upto Rs.510 Crs completely via the Offer for sale option. The issue is opening from 8th to 10th of March with a price band of Rs.186- Rs.187 per share for a lot size of 80 shares.
Easy Trip Planners Ltd aka EaseMyTrip.com is going to be the first online travel booking company to get publicly listed in India with more than a decade of experience. It offers a comprehensive range of travel-related products and services for end-to-end travel solutions, including airline tickets (94% of total revenues as of FY20), hotels and holiday packages (5.4% of total revenues as of FY20) and other services like rail tickets, bus tickets and taxi rentals etc. EaseMyTrip is the only online travel company which is consistently profitable since inception and in FY18-20 it reported robust net profit margins while its competitors suffered. It clocked highest CAGR growth of 47% in Gross Booking Revenues from FY18 to FY20 as compared to Makemytrip (MMT) and Yatra which recorded growth of 20% and -4% respectively. EaseMyTrip’s mantra for success is its unique business strategy wherein it provides its customers with an option of no-convenience fee which means that customers are not required to pay any service fee in instances where there is no alternate discount or promotion coupon is availed. This strategy has paid off handsomely even during the pandemic making them the 2nd player in terms of booking volumes in 9MFY21.
EaseMyTrip.com caters to all three business models: B2B, B2C, and B2B2C (agent biz model). It has the largest network of travel agents among online travel companies with 55,981 travel agents as of FY20 as against MMT’s 3,200 and Yatra’s 26,000 agents. The company’s presence in 3 distinct distribution channels provides them with a diversified customer base and wide distribution network. Considering the stringent lockdowns last year, EaseMyTrip was the least impacted among its peers and it has already recovered 70% of booking volumes as of Q3FY21 compared to MMT’s 46% and Yatra’s 44%. The company’s fastest growing gross booking status (as of 9MFY21), “No-convenience fee” strategy coupled with strong customer connect should enable them to sail smoothly through this competitive and challenging market. It is financially strong but trades at higher valuations making it a risky bet. Hence, given the sentiment investors can subscribe to this IPO for listing gains only at the moment.
Financials:
EaseMyTrip’s total income has grown at a CAGR of 18.7% whereas its PAT has grown at a whopping CAGR of 129% from FY18 to FY20, Despite COVID-19, the company recovered 70% of its pre-pandemic revenues by Q3FY20 which shows its resilience even during the worst crisis. It is the only travel company to record a positive ROE and ROCE of 39.5% and 58.5% respectively in FY20 compared to MMT’s and Yatra.com’s negative return ratios. Moreover, it is the only profitable company in the online travel space with operating margins as high as 23% (FY20) – compared to 87% and -11% for MMT and Yatra.com respectively. EaseMyTrip doesn’t carry any debt on its books and has been using its promoter funds and positive cash flows to grow its business.
Risks:
•Any setback in the commercial suit filed by MakeMyTrip on the company for using “EaseMyTrip” as their brand name could pose as a reputation risk.
•If the pandemic intensifies and countries reinstate a lockdown, then their business can get impacted to a certain degree.
•Inconsistent rise in profits for the last three years due to factors like sudden improvement in other income and advance write-offs. Any sharp decline in other income could impact its profits going ahead. Maintaining consistency is key.
EaseMyTrip is one of the fastest-growing players in the online travel booking industry and considering it is the only profit-making company in the online travel booking space, it is priced at premium valuations at a PE of 61.5 times. But since the GMP around it is strong at the moment, depending upon the market sentiments investors can subscribe for this IPO from a listing gains perspective only.
Easy & quick