Easy Trip Planners coming with an IPO to raise upto Rs 513 crore

Easy Trip Planners

• Easy Trip Planners is coming out with a 100% book building; initial public offering (IPO) of 2,74,19,354 shares of Rs 2 each in a price band Rs 186-187 per equity share.  
• Not less than 75% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not more than 15% of the issue will be available for the non-institutional bidders and the remaining 10% for the retail investors.
• The issue will open for subscription on March 08, 2021 and will close on March 10, 2021.
• The shares will be listed on BSE as well as NSE.
• The face value of the share is Rs 2 and is priced 93 times of its face value on the lower side and 93.50 times on the higher side.
• Book running lead manager to the issue are Axis Capital and JM Financial.
• Compliance Officer for the issue is Preeti Sharma.

Profile of the company

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.

The company commenced operations in 2008 by focusing on the B2B2C (business to business to customer) distribution channel and providing travel agents access to its website to book domestic travel airline tickets in order to cater to the offline travel market in India. Subsequently, by leveraging its B2B2C channel, it commenced operations in the B2C (business to customer) distribution channel in 2011 by primarily focusing on the growing Indian middle class population’s travel requirements. Consequently, due to its presence in the B2B2C and B2C channels, it was able to commence operations in the B2E (business to enterprise) distribution channel in 2013 with the aim of providing end-to-end travel solutions to corporates. Its presence in three distinct distribution channels provides it with a diversified customer base and wide distribution network.

Proceed is being used for:

• Achieving the benefits of listing the equity shares on the Stock Exchanges.
• Enhancing its visibility and brand.
• Providing liquidity to its existing Shareholders.

Industry overview

Tourism industry accounted for 10.3% of the global GDP in 2019, outperforming global economy for ninth consecutive year. While the overall world economy grew at 2.5%, travel and tourism GDP recorded a 3.5% growth in 2019. As of 2019, domestic travel continued to generate the majority of global travel and tourism expenditure (accounting for 71.3% of total global spending), with the remaining 28.7% coming from international visitors. In leisure and business travel, spending is heavily tilted towards the leisure segment that accounted for 78.6% of the total compared with 21.4% in the business segment in 2019. Travel and tourism is a catalyst for economic recovery and growth and is responsible for 330 million jobs globally. Over the past five years (i.e. 2014-2019), one in four of all new jobs created across the world in all sectors and industries, have been in travel and tourism. The continued rise in the number of middle-class households, sustained low unemployment rates, and visa relaxations in several countries globally enabled travel and tourism growth to reach 3.5% in 2019, surpassing the global economy for the ninth consecutive year.

India’s tourism spending recorded a CAGR of 5.8% from 2014 to 2019, driven by rising incomes and improved availability and affordability of travel. Traditionally, domestic tourism has accounted for a dominant share in India’s overall tourism spend, which has constantly increased since 2013 and was at 86% in 2019. Outbound tourism, in contrast, has grown at a faster rate of 9.7% annually between 2014 and 2019, driven by increasing number of Indians travelling abroad for leisure and business purposes, higher ranking of the Indian passport, and rising awareness about foreign tourist destinations, taking outbound tourisms’ share to 14% of India’s total tourism spend as of 2019. According to WTTC, India’s spending on tourism showed a growth of 5.4% and reached Rs 11.8 trillion in 2019, due to an increase in outbound tourism spending that reached to Rs 10.1 trillion in 2019 from Rs 9.6 trillion in 2018. Consequently, India’s tourism spending as a percentage of its GDP remained at 5.9% in 2019.

Pros and strengths

One of the leading online travel agencies in India: The company was 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. 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. Its mobile application (EaseMyTrip) was the highest rated application amongst Key Online Travel Agencies in India, as of February 2021. It provides customer support at all stages of its customers’ trips - before, during and after, through its in-house call centres, which enables it to resolve inquiries/ complaints relatively quicker, and through online modes comprising e-mail and web-based support. It also enables customers to receive e-tickets and flight alerts through text messages and online messaging platforms, and allow its mobile applications customers to synchronize their flight and hotel details with their smartphone calendars. Further, it also offers an ‘airplane chat’ feature on its android mobile application that allows passengers to communicate with each other.

In-house advanced technology and analytics capabilities: The company has a dedicated in-house technology team focused on developing a secure, advanced and scalable technology infrastructure and software. This has enabled it to better manage its product and service offerings and improve operating efficiencies by integrating its sales, delivery and customer service functions. It continues to focus on developing innovative service offerings and introducing technology driven customer acquisition, service delivery and customer satisfaction initiatives. Its in-house technology team has enabled it to continuously strengthen its scalable technology infrastructure, support customer focused initiatives, introduce innovative services and solutions, and improve its product and service delivery, which has enabled it to maintain high levels of customer satisfaction and grow its market share.

Wide distribution network supported by hybrid platform: The company’s three distinct distribution channels, namely B2C, B2E and B2B2C channels, provide it with a diversified customer base and wide distribution network. These channels enable it to provide end-to-end travel solutions for passengers traveling domestically, as well as traveling to and from international destinations. Further, its presence in three distinct distribution channels enable it to cross-sell its products and services between such distribution channels. Its distribution channels are supported by a hybrid platform which is a combination of its websites, mobile applications and network of travel agents across India as well as call centres, particularly for holiday packages. It has developed streamlined software across its distribution channels, which provides it with multiple points of contact for marketing additional travel products and services to existing customers.

Well-recognized brand with targeted marketing strategy: The company’s leading market position and operational history have 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 invested in developing and promoting its brand since its inception, using a combination of online, offline, cross-marketing, social media and other marketing initiatives. Its customer acquisition cost in the B2C channel (calculated based on the amount spent on advertising and sales promotion divided by the number of new Registered Customers added in the relevant fiscal) was Rs 173.85 and Rs 138.13 per customer in Fiscal 2020 and the nine months ended December 31, 2020, respectively. Its marketing programs and initiatives also include promotional, seasonal, festival and event related offers including certain women centric marketing campaigns that it has introduced recently.  Its marketing strategies have increased its brand awareness, driven potential customers to its platforms and improved the rate at which visitors become customers.

Risks and concerns

Dependent on airline ticketing business: A significant portion of the company’s Gross Booking Volumes and Gross Booking Revenues on its website and mobile application platforms are made for air tickets, by both customers and travel agents registered with it. In Fiscal 2020 and the nine months ended December 31, 2020, its Gross Booking Volumes for airline tickets comprised 94.43% and 92.53%, respectively, of its total Gross Booking Volumes while its Gross Booking Revenues for airline tickets were 97.83% and 98.28%, respectively, of its total Gross Booking Revenues in such periods. It primarily earns revenue from the air tickets booked by customers through its platforms in the form of commissions and incentives. Commissions and incentive payments, such as performance linked bonus, are primarily received from GDS service providers and certain airlines as well as credit card companies on a periodic basis, and are generally based on the volume of sales generated by it. Its reliance on a few airlines exposes it to the risks associated with the airline industry and aviation industry in India, such as fuel price volatility, increasing safety concerns, bankruptcy or liquidation concerns, management employee disputes, high taxes and increasing cost implications.

Business highly depends on availability of credit cards, financing options for consumers: The company’s business is highly dependent on the availability of credit cards and financing options for consumers. It offers customers the flexibility to choose a number of payment options, which include credit cards. It earns incentives from credit card companies on a periodic basis. Further, it also has and aim to continue to enter into arrangements with credit card companies for cross-selling and marketing initiatives. Substantial part of its sales is derived from payments effected through credit cards. As a result, adverse changes in its relationships with credit card companies, or the inability to enter into new relationships with credit card companies, could reduce the number of bookings and commissions earned, which could adversely affect its business and financial performance.

Intense competition: The Indian travel market is intensely competitive. The company’s success depends upon its 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. The key players in the domestic online travel agency market include Cleartrip Private, MakeMytrip and Yatra Online, Inc. Factors affecting its competitive success include, among other things, price, availability and variety of travel services and products, brand recognition, customer service including ease of use and accessibility, customer loyalty, reliability of products and services, fees charged to customers and technology. Some of its competitors may have significantly greater financial, marketing, more experienced management and other resources than it and certain of its competitors have a longer history of established businesses and reputations in the Indian travel market as compared to it due to which they may offer more services and facilities at similar or competitive prices.

Depends on relationships with various travel suppliers, corporate customers: The travel industry largely operates through associate networks globally. Accordingly, the company’s business is dependent on its ability to maintain its relationships and arrangements with various travel suppliers, such as its GDS and API service providers, airlines that supply air tickets to it directly, Indian Railways, hotel suppliers, channel managers, bus and taxi service providers and operators as well as its ability to establish and maintain relationships with corporate customers and IATA. It derives a substantial portion of its revenue from commissions, incentives and fees negotiated with travel suppliers for bookings made through its platforms. However, currently, the company does not prohibit its travel suppliers from developing business relationships with its competitors or selling, through their direct sales, travel products that are the same as or similar to those they supply to it.

Outlook

Incorporated in 2008, Easy Trip Planners is the second largest online travel agency in India 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. It offers a range of online traveling services through its website and Ease My Trip android and iOS mobile app. The company follows B2B2C (business to business to customer), B2C (business to customer), and B2E (business to enterprise) distribution channels to offers its services. It has a dedicated in-house technology team focused on developing a secure, advanced and scalable technology infrastructure and software. The company benefits from the experience of its Promoters and senior management team who have extensive knowledge in the travel industry, specifically in the online travel industry. On the concern side, the company’s business may expose it to the risk of fraud, misappropriation or misrepresentation or unauthorized transactions by its representatives and employees which could result in binding it to transactions that exceed authorised limits or present unacceptable risks. Besides, its success depends on maintaining the integrity of its systems and infrastructure, and adapting to technological developments, which may suffer from failures, capacity constraints, business interruptions and forces beyond its control.

The issue has been offered in a price band of Rs 186-187 per equity share. The aggregate size of the offer is around Rs 509.99 crore to Rs 512.74 crore based on lower and upper price band respectively. On the performance front, total income, on an unconsolidated basis, increased by 18.94% from Rs 1,511.11 million in Fiscal 2019 to Rs 1,797.24 million in Fiscal 2020 primarily due to an increase in revenue from operations. It recorded a restated profit for the years, on an unconsolidated basis, of Rs 346.48 million in Fiscal 2020 compared to Rs 239.93 million in Fiscal 2019. The company aims to undertake certain digital marketing tools, such as metasearch engine marketing for hotels, which have been gaining prominence in the online travel industry. In addition, it endeavours to expand its presence in hotels and holiday packages outside India through partnerships and arrangements as well as by strengthening its relationships with international hotel suppliers. It also aims to offer more discounted travel products and services which are exclusive to users of its mobile applications and also plan to expand functionality of its mobile applications to include more location and language-based services and recommendations that facilitate travel planning, provide support to customers during their travels and generally improve user experience and engagement.