EasyTrip Planners Ltd. listed publicly last week with an offer of ₹510 crore, with the issue being entirely an offer for sale. Founders Nishant and Rikant Pitti, who hold more than 49% stake each, will sell shares to the tune of ₹255 crore each. The IPO of the company, which operates EaseMyTrip.com, was subscribed 160 times on the final day. The company said the objective of the IPO is to enhance visibility, brand, and provide liquidity to existing shareholders. The offer stood at 2.7 crore equity shares at a price band of ₹186 to ₹187.
Founded in 2008, EasyTrip Planners offers air ticketing, hotels and holiday packages, bus and rail services, catering to domestic and international customers. It also providers ancillary travel services such as visa processing and travel insurance. EaseMyTrip claims a 4.6% market share of the online travel agency industry in India, with 5.5% market share in domestic air ticketing.
Ahead of the IPO, the company had raised ₹229.5 crore from anchor investors at ₹187 per share, including from HSBC Global Investment Funds, Nomura, Tata Trustee Company, Aditya Birla Sunlife Insurance Company, Sundaram Mutual Fund, Bajaj Allianz Life Insurance Company and Nippon Life India Trustee Company.
We have summarised EasyTrip Planners Ltd.’s prospectus below.
Operational Highlights
- 22.58 million visits in FY18, 51.59 million in FY20, 28.16 million in nine months ended Dec 30, 2020
- Air ticketing booking volumes via mobile app grew by 84.8% from 1.06 million in FY19 to 1.95 million in FY20
- The company works with nearly 60,000 travel agents in major cities. B2B2C channel accounted for 11.32% and 10.64% of gross booking volumes for air ticketing in FY19 and FY20.
- 11,664 and 12,505 corporate clients as of March 2020 and December 2020
- Gross Booking Volumes for hotels and holiday packages have increased at a CAGR of 136.31% from 6,507 in Fiscal 2018 to 36,337 in Fiscal 2020 and were 14.123 in the nine months ended December 31, 2020.
The company also saw significant revenue growth from sale of airline tickets between FY18 and FY19, of 35.22% and 35% for GoAir and SpiceJet, respectively. The number of Trips increased by 35.74% from 4.70 million in Fiscal 2018 to 6.38 million in Fiscal 2019, and by 40.42% from 6.38 million in Fiscal 2019 to 8.96 million in Fiscal 2020. In Fiscals 2018, 2019 and 2020, the average number of Trips booked per day by us was 12,885, 17,490 and 24,494, respectively.
Impact of COVID-19
Due the COVID-19 pandemic, EaseMyTrip’s gross booking volumes fell from 4.05 million in Q1-Q3 FY20 to 1.77 million in Q1-Q3 FY21. The revenue decline was offset by decline in service cost, marketing and sales and payment gateway charges. The pandemic severely restricted economic activity worldwide, hitting travel and tourism severely. With individual movement curtailed, customers and suppliers, including hotels and airlines stopped services, with unprecedented cancellation levels. The company expects low travel demand, resulting in cancellations, refund requests, and reduced new orders, particularly around international travel.
Further, even when COVID-19 restrictions are lifted, personal and business-related discretionary travel and spend levels could fall given decreased per capita income and disposable income or because of prolonged unemployment levels. While the Indian government has begun vaccination since January, achieving vaccination scale may take a significant amount of time.
The measures implemented to contain the COVID-19 pandemic have had, and are expected to continue to have, a significant negative effect on our business, financial condition, results of operations, cash flows and liquidity position. 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. Although some governments are beginning to ease or lift such restrictions, the impacts from the severe disruptions caused by the effective shutdown of large segments of the global economy remain unknown.
EaseMyTrip developed chatbots that allows customers to book tickets, check prices, and get alerts. Airline tickets can be modified on a messaging platform. Salary reductions, work-from-home policies, renegotiating rent, and deferring non-critical capital expenditures, reducing marketing and sales expense, and payment gateway costs were undertaken to reduce cost.
Air ticketing crucial segment
Air ticketing comprised 94% of total gross booking volumes for FY20, and 97% of total gross booking revenue. Revenue primarily comes from commissions and incentives on air tickets booked, and also from convenience fee, cancellation and rescheduling fees, and ad revenue. These come from GDS service providers, certain airlines, and credit card companies, on a periodic basis and are generally based on volume of sales.
- In FY18, 19 and 20, and the nine months ended December 31, 2020, air passage represented 98.12%, 97.15%, 94.00% and 101.25%, respectively, of total revenue from contracts with customers. Air passage from domestic airlines represented 86.13%, 86.10%, 88.72% and 97.58%, respectively, of total revenue during such periods.
- In addition, the segment is dependent on five domestic airlines, five airlines made up 80.71% of total gross booking revenues from air ticketing. This exposes the company to risks around fuel price changes, bankruptcy concerns, high taxes etc.
Key Takeaways
- Search engines and metasearch services have started offering travel planning services, which could lead to traffic going to supplier websites and can affect the company’s ability to appear in paid or unpaid search results. Some metasearch sites now let users book directly on the websites, which could impact traffic and transactions to EaseMyTrip.
- Trademark infringement suit: MakeMyTrip has sued the company in Delhi High Court for trademark infringement for EasyMyTrip, and also asking for injunction on the company’s domain names.
- Strategy for Tier 2 and Tier 3 cities: Indian customers in Tier 2 and 3 cities will continue to use traditional travel agents. The company’s strategy in the space to work with travel agents to reduce their operational costs. Domestic carriers have started servicing Tier 2 and 3 cities given that airport infrastructure has developed. The company wants to leverage the existing travel agent network to meet growing demand, and also help with onboarding local hotels, increase the number of agents, and provide the platforms in vernacular languages.
- Cross-selling: The company believes there is opportunity to cross-sell holiday packages, hotels, and other travel products by offering discounting, post-sale emails, marketing offers and so on. It also sells travel nuance, in-flight food and beverages, excess baggage, sear selection, visa processing, to air ticketing customers.
Business risks
- The company does not have written agreements with several of the agents and the relationships are based on good faith.
- The upcoming Personal Data Protection Bill, 2019, may bring in additional compliance, including local storage of the data of customers in India. It can restrict the company’s ability to collect information from suppliers and third parties.
- Changs to search engine algorithms could ne
Business segments and revenue
Segment Revenue
Gross booking revenue: FY18 | FY19 | FY20 | Nine months ended Dec 30, 2020
- Air ticketing: ₹19.22 billion | ₹28.9 billion | ₹42 billion | ₹11.9 billion
- Hotels & Holiday packages: ₹198 million | ₹338 million | ₹585 million | ₹90 million
- Others (Bus and rail tickets and taxi rentals): ₹25 million | ₹91 million | ₹325 million | ₹121 million
Air ticketing
The company was providing ticketing for two full-service airlines and six low-cost airlines operating in India, and another 400 airlines in other counties, including domestic airlines such as Indigo, GoAirlines, and Etihad Airways.
Domestic v. International Gross Booking Volumes: FY18 | FY19 | FY20 | Nine months ended Dec 30, 2020
- Domestic: 2.22 million | 3.24 million | 4.77 million | 1.59 million
- International: 0.13 million | 0.32 million | 0.36 million | 0.05 million
Domestic v. International Gross Booking Revenue: FY18 | FY19 | FY20 | Nine months ended Dec 30, 2020
- Domestic: ₹12.1 billion | ₹18.3 billion | ₹26.5 billion | ₹10.3 billion
- International: ₹1.2 billion | ₹5.3 billion | ₹6 billion | ₹750 million
Hotels
This segment was launched in 2013, with over 73,000 hotels in India and over a million hotels available outside in India available as of December 31, 2020.
- Gross booking volumes: 6,507 in FY18 | 36,337 FY 20 | 14,123 in the nine months ended December 31, 2020 | Representing a CAGR of 136.31%
- Gross booking revenue: ₹197.39 million FY18 | ₹585.16 million in FY20 | ₹89.80 million in the nine months ended December 31, 2020 | Representing a CAGR of 72.18%
Distribution channels
Gross booking volumes: FY18 | FY19 | FY20 | Nine months ended Dec 31, 2020
- B2C: 1.85 million | 3.08 million | 4.44 million | 1.52 million
- B2B2C: 0.46 million | 0.40 million | 0.55 million | 0.09 million
- B2E: 0.04 million | 0.09 million | 0.14 million | 0.02 million
The B2E channel is focused on corporates to provide and currently includes Jindal Stainless, Delhivery, and others. The B2B2C channel is focused on customers in Tier 2 and 3 cities through travel agents.
