Easy Trip Planners Ltd (EaseMyTrip) IPO Review - Should You Subscribe?

 

Incorporated in 2008, Delhi based Easy Trip Planners Ltd is going to debut in the primary market in the second week of March, 2021. This is the 10th mainline IPO of the year 2021. The Indian IPO market has been so successful post lockdown lifting so far and barring one or two, every IPO has been getting an overwhelming response and brought a smile on the faces of investors on listing day. The market has remained all-time high in 2021, so many companies have lined up their IPOs to take advantage of such an unprecedented rally in the equity market. The recent favorable Union Budget has pushed the market further.

Let’s talk about the company in question. Easy Trip Planners Ltd (EasyTrip) ranked second among the Key Online Travel Agencies in India in terms of booking volume in the nine months ended December 31, 2020 and third among the Key Online Travel Agencies in India in terms of gross booking revenues in Fiscal 2020.

Issue Detail: The issue is going to open on March 8, 2021 and closing on March 10, 2021. The tentative dates of allotment and listing are March 17, and March 19 respectively. The issue size is for INR 510 Crore. 10% shares are reserved for Retail Investors. It is a 100% offer for sale by promoter shareholders.

Object of the issue: As it is a 100% offer for sale, the company will not receive any proceeds out of this issue. The entire proceeds will go to selling shareholders.

Pricing of the issue: The price is set between INR 186 – 187 per share. The company has asked the price which is 61.18 to 61.51 times of its consolidated EPS as on March 31, 2020 i.e. 3.04. The NAV as on December 31, 2020 was INR 12.16, the company has asked the price which is 15.29 – 15.38 times of its book value (NAV). At this multiple of PE and PB, share seems little costly to me. However, as there are no listed entities in India whose business portfolio is comparable with that of EaseMyTrip, whether the share is undervalued or overvalued is not ascertainable. However, I believe there are a lot of mid cap stock trading at very reasonable valuation, I would better invest in them. The fate of this IPO will depend on the market sentiment at the time of issue and listing.

Dividend: The company has not declared any dividend in the past. It seems conservatives approach management in paying dividends and using retained earnings for the growth of the company.

Return on Networth (RoNW): The most favorable part of this company is that it is the only profit making company in the OTA sector (Online Travel Agent). It’s RoNW is as good as 33% approx.

Debt/Equity Ratio: The company’s debt/equity ratio is ‘Zero’. It is tantamount that the company is cash rich.

Revenues & Profitability: The company has been consistently profitable since incorporation, and according to the CRISIL Report, it was the only profitable online travel agency among the Key Online Travel Agencies in India in Fiscals 2018, 2019 and 2020, in terms of net profit margin. It had the highest CAGR from Fiscal 2018 to Fiscal 2020 in terms of gross booking revenue and operating revenues among the Key Online Travel Agencies in India. Its Gross Booking Revenues increased by 51.04% from INR 1,945.06 Crore in Fiscal 2018 to INR 2,937.78 Crore in Fiscal 2019, and by 43.13% from INR 2,937.78 Crore in Fiscal 2019 to INR 4,204.73 Crore in Fiscal 2020. Its Gross Booking Revenues amounted to INR 1,220.76 Crore in the nine months ended December 31, 2020. Its market share in the total Indian online travel agency industry in terms of gross booking revenues and gross booking revenues for airline ticketing segment was approximately 4.6%, and 5.5% to 6.5%, respectively, in Fiscal 2020

Company profile: The company offers a comprehensive range of travel-related products and services for end-to-end travel solutions, including airline tickets, hotels and holiday packages, rail tickets, bus tickets and taxis as well as ancillary value added services such as travel insurance, visa processing and tickets for activities and attractions. As of December 31, 2020, it provided its customers with access to more than 400 international and domestic airlines, more than 1,096,400 hotels in India and international jurisdictions, almost all the railway stations in India as well as bus tickets and taxi rentals for major cities in India. In addition, as of March 31, 2020, it had 55,981 travel agents registered with it across almost all major cities in India and according to the CRISIL Report, the company had the largest network of travel agents among Key Online Travel Agencies as of such period. Further, the number of travel agents registered with the company increased to 59,274, as of December 31, 2020.

Qualitative factors:

ü One of the leading online travel agencies in India with a customer focused approach, including the option of no-convenience fee

ü Consistent track record of financial and operational performance with lean and cost efficient operations

ü In house advanced technology and analytical capabilities

ü Wide distribution network supported by a hybrid platform

ü Well recognized brand with a targeted marketing strategy

ü Experienced management team with an established track record

Major Risk:

ü  The COVID-19 pandemic has had, and is expected to have, a material adverse effect on the travel industry and the company’s business, financial condition, results of operations and cash flows

ü  The company is dependent on its airline ticketing business, which generates a significant percentage of its revenues and is derived from a small number of airline suppliers in India

ü  The travel industry for India and India-related travel is intensely competitive, and the company may not be able to effectively compete in the future.

Conclusion: NEUTRAL. Overall, the company seems good, it has young and dynamic management, performance is good so far. Robust growth ahead due to the number of people who are increasing day by day who use the internet. The financial statistics are also impressive. However, the pricing is a little on the higher side. The business is very competitive. Market share is as little as 5%.

Thank you for reading...Jai Hind!

Note: I write reviews based on my knowledge and understanding. The readers of this article should do his/her own research before taking any investment decision.