Ease My Trip IPO Analysis!
Last updated: 04 Mar, 2021 | 11:02 am
Easy Trip Planners, the holding company for online travel portal easemytrip.com, is set to raise up to Rs 510 crore through IPO which opens on March 8th, Monday.
About Easy Trip Planners
- Easy Trip Planners is the second largest online travel agency in India (after MakeMyTrip), in terms of gross revenue. The online travel agency offers a range of travel products and services and end-to-end travel solutions including airline tickets, rail tickets, bus tickets, taxis, holiday packages, hotels, and other value-added services i.e. travel insurance, visa processing, etc.
- Easy Trip operates through its website, and mobile app. The company follows B2B2C (business to business to customer), B2C (business to customer), and B2E (business to enterprise) distribution channels to offer its services.
- They provide their customers with access to more than 400 international and domestic airlines, and nearly 10.9 lakh hotels in India and in international jurisdictions, almost all railway stations in India as well as bus tickets to and cab rentals for major cities in India. However, Yet more than 75% of its air-ticketing revenue is dependent on five domestic airlines.
- Easy Trip earns more than 90% of its revenue through air tickets booked on its website and mobile application.
Comparison with peers
- Ease My Trip’s market share in the Indian online travel agency industry in terms of gross booking revenues was around 5% in FY20.
- Easy Trip Planners (which operates the OTA) had overtaken Yatra by registering 2.1 million trip bookings during the nine months ended December 31, 2020. In comparison, MakeMyTrip had segment bookings of 5.3 million and Yatra had trip bookings of 1.52 million.
- The company's marketing and sales promotion expense as a percentage of gross booking revenue stood at 0.83% in the 2020 financial year, as compared to 2.73% for MakeMyTrip and 0.96% for Yatra.
- There are no listed peers.
Impact of Covid-19
- Covid-19 has severely impacted Easy Trip’s gross booking revenue and gross booking volume, as the there were travel restrictions for most part of the year. Gross booking revenue declined to Rs 1,220.75 crore in the nine months ended December 2020 from Rs 3,179.80 crore in the same period previous fiscal. Gross booking volume dropped to 1.77 million in the April-December 2020 period from 4.05 million in the previous year.
- Gross booking volumes in October-December 2020 quarter have reached 70% of that achieved in the third quarter of the last financial year, according to the company’s management.
- The company has seen a good growth in topline over the last 3 years, with revenue from operations increasing from Rs 114 cr in FY18 to ~Rs 181 cr in FY20. For the first 9 months of FY21, the company has earned revenue of Rs 81.5 crore.
- The net profit has also grown from Rs 3 lakh in FY18 to about Rs 33 crore in FY20. Due to IAS accounting provisioning and write-off for a discontinued business of Bollywood funding plans, its bottom line for FY18 got affected, lading to a profit of just Rs 3 lakh in that year.
- For FY20 and 3Qs of FY 21, its trade payables increased from 20.64 cr. to Rs. 56.17 cr. and trade receivables too increased from 10.36 cr. to Rs.21.10 cr. This may raise some concerns. Further, bank deposits declined from Rs. 65.82 cr. to Rs. 31.27 cr.
- The OTA’s refunded customers even before airlines began doing it, dipping into its cash reserves of Rs 200 crore. The company also continues its practice of not charging convenience fees.
- While the company had a net profit margin of 23.33% at the end of FY20, peers MakeMyTrip and Yatra were in the negative.
- The company has not paid any dividends so far.
About the issue
Issue open: 8th Mar - 10th Mar 2021
Price band: Rs 186-187 per share
Issue Size: Rs 510 crore (Gross)
Issue Size: It comprises an offer-for-sale of 2.72 crore shares, amounting to 25.10% of the paid-up equity.
Reservation for QIB: 50% , Retail - 10%, Non institutional Investors -15%.
Bid lot: 80 shares, and in multiples of 80 shares
Post issue market cap: ~Rs 2,031 crore
At the higher end of the price band, Easy Trip Planners IPO is priced at a PE ratio of ~62 times FY20 earnings per share. While this seems to be aggressively priced, the company has posted robust growth in topline and bottomline over the last few years. The company has been consistently profitable since incorporation, and posted a robust net margin of 23% in FY20, even as peers made losses. It also has a debt-free balance sheet. The expectations of a quick rollout of the vaccine would also improve outlook for the company’s business going forward.
Given strong revenue and profit growth over the last few years, stable margins, good return ratios, asset-light model, and robust growth outlook, we remain positive on the prospects of the issue.