The company commenced operations in 2008 and its presence in three distinct distribution channels, namely Business to Customers (2C), Business to Enterprises (B2E) and Business to Business to Customers (B2B2C) channels, provides it with a diversified customer base and wide distribution network. It has been providing customers with the option of no-convenience fee in instances where there are no alternate discounts or promotion coupon being availed. In the pricing model, the company has endeavored to avoid hidden costs, which result in increasing the final price payable by the customer.

The company has posted the highest CAGR in terms of gross booking revenue and operating revenues among the Key Online Travel Agencies in India from FY2018 to FY2020. Gross Booking Revenues of the company have more than doubled from Rs 1945.06 crore in FY2018 to Rs 4204.73 crore in FY2020. The market share in the total Indian online travel agency industry in terms of gross booking revenues was approximately 4.6% and gross booking revenues for the airline ticketing segment was 5.5%-6.5% in FY2020.

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. It provided 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, the company has the largest network of 59274 travel agents among Key Online Travel Agencies across almost all major cities in India.

Nishant Pitti is a Whole-time Director and CEO of the Company. He is one of the promoters and has been associated with Company since its incorporation and has approximately 12 years of experience in the travel and tourism sector. He is responsible for overall management of Company, business development and the financial aspect of Company's business.

The company has higher customer stickiness with a repeat transaction rate of 85.95% in the B2C channel. The number of registered customers in the B2C channel has increased at a CAGR of 28% from 5.87 million customers end March 2018 to 9.66 million customers end March 2020 and further increased to 10.32 million customers end December 2020. Gross Booking Volumes more than doubled from 2.37 million in FY2018 to 5.43 million in FY2020.

The brand strength, the quality of services, user-friendly websites (www.easemytrip.com and www.easemytrip.in), android and iOS based mobile applications (EaseMyTrip), customer centric approach, as well as efficient marketing programs have enabled the company to develop significant market share in the domestic airline ticket business in India. Visits to websites have increased to 51.59 million visits in FY2020. Downloads of mobile applications have surged to 5.47 million end December 2020.

The company has a dedicated in-house technology team focused on developing a secure, advanced and scalable technology infrastructure and software. The technology-enabled infrastructure and systems have enabled the company to operate and maintain an efficient and lean organization relative to the size of operations.

The company had 349 full-time employees at the end December 2020 and incurred the lowest per employee cost and lowest employee expense as a percentage of gross booking revenues among the Key Online Travel Agencies in India. Further, the company has the lowest marketing and sales promotion expense as a percentage of gross booking revenues and lowest other operating expense as a percentage of gross booking revenues among the Key Online Travel Agencies in India.

The total standalone income of the company has increased sharply from Rs 113.57 crore in FY2018 to Rs 179.72 crore in FY2020. Total income amounted to Rs 81.47 million in 9MFY2021. EBITDA from continuing operations increased from Rs 12.28 crore in FY2018 to Rs 49.89 crore in FY2020 and stood at Rs 43.36 crore in 9MFY2021.

While the recently commenced vaccination drive in India is a positive development, the COVID-19 pandemic has affected and is expected to continue to affect business and operational performance in the near future. Further, no prediction can be made of when any of the restrictions currently in place will be relaxed or when further restrictions will be announced. International travel demand recovery continues to remain muted as majority cross border restrictions are still in place. The company continues to implement various cost saving measures and modified policies in light of the COVID-19 pandemic.

There is some positivity in the travel industry expected, which is primarily to be driven by development of tourism infrastructure, increase in connectivity across means of transport, rising income levels translating to higher discretionary spending on travel and tourism, reforms in visa and passport allowing easier access to India (in case of foreign tourist arrivals) and other countries (in case of Indian passport holders) and frequency of travel for business and leisure purposes.

The Offer and the Objects

The initial public offer comprises an offer for sale (OFS) of Rs 510 crore, aggregating to 2.74 crore equity shares at the lower price of Rs 186 and 2.73 crore equity shares at the upper price band of Rs 187.

The offer comprises of offer for sale of equity shares aggregating up to Rs 255 crore each from promoters Nishant Pitti and Rikant Pittie. Nishant Pitti holds 49.81% and Rikant Pittie is holding 49.68% stake in the company. The post issue promoters shareholding in the company would decline to 74.9% from 100%.

The issue, through the book-building process, will open on 08 March 2021 and will close on 10 March 2021.

The company expects that listing of the Equity Shares will enhance visibility and brand image and provide liquidity to Shareholders and will also provide a public market for the Equity Shares in India.

Strengths

The company is one of the leading online travel agencies in India with a customer focused approach, including the option of no-convenience fee. It has ranked second in terms of booking volume and third in terms of gross booking revenues.

It has a consistent track record of financial and operational performance with lean and cost efficient operations. The company is the only online travel agency among the Key Online Travel Agencies in India to record a positive return on equity and return on capital employed. It's also the only profitable online travel agency among the Key Online Travel Agencies in India, in terms of net profit margin.

The company has the lowest other operating expense as a percentage of gross booking revenues among the Key Online Travel Agencies in India.

The consistent growth in business is attributable to technology driven operations and low operational costs resulting in comparatively higher operating margins.

The company has a dedicated in-house technology team focused on developing a secure, advanced and scalable technology infrastructure and software, which has enabled it to better manage product and service offerings and improve operating efficiencies by integrating sales, delivery and customer service functions.

The focus on a strong technology platform, large customer base and growing market share, and data analytics capabilities allows the company to prioritize search results and provide customer-relevant information in a simple and intuitive interface.

The company has a wide distribution network supported by a hybrid platform. It has three distinct distribution channels, namely B2C, B2E and B2B2C channels with a diversified customer base and wide distribution network. The distribution channels are supported by a hybrid platform which is a combination of websites, mobile applications and network of travel agents across India as well as call centres, particularly for holiday packages.

The leading market position and operational history has led to recognition of the 'EaseMyTrip' brand in India, enabling it to target new customers and provide better leverage when contracting with airlines and hotel suppliers. The company has received various awards and recognitions. It has also entered into alliances with various brands for cross-marketing products and services.

Weaknesses

The COVID-19 pandemic has had and is expected to have, a material adverse effect on the travel industry. The COVID-19 pandemic could continue to impede global economic activity and low travel demand, resulting in significant customer cancellations and refund requests and reduced new orders, particularly relating to international travel is expected to continue. Domestic and international travel restrictions resulted in a decrease in Gross Booking Revenue (down 62% to Rs 1220.76 crore) and Gross Booking Volumes (down 56% to 1.77 million) in 9MFY2021.

The company primarily earns revenue from the air tickets booked by customers through its platforms in the form of commissions and incentives. A significant portion of Gross Booking Volumes and Gross Booking Revenues are generated from air tickets at 92.53% and 98.28% in 9MFY2021. Gross Booking Revenues generated from the top five domestic airlines represented 75.25% of total Gross Booking Revenues for airline tickets in 9MFY21.

Airlines directly engaging with customers or other similar online travel agencies, further consolidation of airline suppliers are major risks.

The travel industry for India and India-related travel is intensely competitive and success depends upon ability to compete effectively against numerous established and emerging competitors, including other online travel agencies, traditional offline travel companies, travel research companies, payment wallets, search engines and meta-search companies, both in India and outside India.

Some travel suppliers may reduce or eliminate the commission, incentive and other compensation paid to the company for the sale of airline tickets.

The company has a limited experience and operating history in certain businesses, particularly in hotels and holiday packages, and railway ticketing operations, which makes it difficult to accurately assess future growth prospects.

The company relies significantly on the capacity, reliability and security of computer systems, technology and service providers that generates, facilitates and processes transactions, channel managers and reservation systems used by certain airlines, hotels, IRCTC and taxi and bus operators, as well as cloud computing and payment processing software services.

The business depends on relationships with various travel suppliers and corporate customers as well as with IATA and any adverse changes in these relationships could negatively affect business.

There is no fresh issue of equity shares by the company in the IPO and the company will not receive any funds from IPO.

The company has provided certain loans which have been written off. The advances written off amounted to Rs 29.31 crore in FY2018, Rs 2.95 crore in FY2019, Rs 0.90 crore in FY2020 and Rs 0.36 crore in 9MFY2021. The company may continue to provide such loans and there can be no assurance that it may not be compelled to write-off these loans

The travel industry in India, as well as globally, is susceptible to extraneous events. The travel industry is particularly sensitive to safety concerns, such as natural calamities, terrorist attacks, regional conflicts, infectious outbreaks, such as the COVID-19 pandemic or health related concerns, or other catastrophic events.

The company relies on internet search engines and search engine optimization to generate traffic to its websites and particularly acquire new online visitors on the website, principally through the purchase of travel-related keywords. It could be negatively affected by changes in internet search engine algorithms and dynamics, or search engine disintermediation or changes in the internet browser functionality.

The company has incorporated a subsidiary in the United Kingdom, Easemytrip UK and acquired Singapore Arrivals Pte in Singapore and Easemytrip Middleeast DMCC in United Arab Emirates. The international operations are new and involve additional risks.

Valuation

Revenues of the company on standalone basis for the fiscal ended March 2020 have increased 39% to Rs 140.99 crore. The operating profit margin turned positive to 8.9% and operating profit improved to Rs 12.58 crore in FY2020. The PBT was up by 15% to Rs 47.52 crore. Taxation was up 9% to Rs 12.87 crore and thus the PAT moved up 18% to Rs 34.65 crore. The company has posted net profit of Rs 31.11 crore and sales of Rs 49.25 crore for 9MFY2021.

On consolidated basis, the sales stood at Rs 49.27 crore and net profit at Rs 30.54 crore in 9MFY2021.

The EPS stood at Rs 3.0 for FY2020 and Rs 3.7 annualized for 9MFY2021 on consolidated basis. At the higher price band of Rs 187, the offer is made at around 49.9 times its annualized 9MFY2021 consolidated EPS and 61.6 times of FY2020 consolidated EPS.

The company has no comparable listed peers with exact product/business profile. MakeMy Trip which is listed on Nasdaq is having negative EPS and its trading at m-cap to FY2020 gross booking revenues ratio of 0.54 times, while the company is offered at post issue m-cap to FY2020 gross booking revenues ratio of 0.48 times.

Among the online services providers, IRCTC offering online train ticket booking services is trading at 58.9 times FY2020 EPS and 361.5 times 9MFY2021 EPS. Matrimony.com providing online matchmaking services is trading at 81.8 times FY2020 EPS and 76.3 times its 9MFY2021 EPS.

The company is profitable online travel company since inception with healthy RoE of 23.1% for 9MFY2021 and 32.6% for FY2020. The company has recovered 70% booking volumes in Q3FY2021 as compared to Q3FY2020, while MakeMyTrip was able to achieve 46% and Yatra Online, Inc. at 44% of booking volumes for Q3FY2021.

Market fancy for the internet/online stocks, likely turnaround of the tourism sector, positive sentiments around the vaccine roll out is likely to benefit the company.

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