Here is why analysts maintain a bullish mood for the ₹510 crore IPO of bootstrapped online travel aggregator EaseMyTrip

Here is why analysts maintain a bullish mood for the ₹510 crore IPO of bootstrapped online travel aggregator EaseMyTrip
BCCL
  • The ₹510 crore IPO of EaseMyTrip is now open for public subscription.
  • The best thing about the travel aggregator is the cost-conscious model that sets it aside from other travel aggregators in India.
  • Being bootstrapped, the management of the company has tended to be extremely cost-conscious, and this has enabled them to be profitable since inception, said a Ventura report.
  • According to Choice Broking, Easy Trip has been profitable since its inception and is the only profitable company among the key OTAs.
  • The ICICI Direct report highlighted that taking cognisance of the huge growth opportunities for EaseMyTrip and a lean cost of operations would aid the flow of profitability to the bottom line.
From the Indian government-run companies RailTel and IRFC to the most successful IPO of 2021 MTAR Technologies — the IPO bonanza doesn’t seem to be ending soon. Next in the line is the bootstrapped online travel aggregator, EaseMyTrip, making its way to the public markets.

The ₹510 crore IPO of EaseMyTrip is now open for public subscription. The company is an exception among a large pool of internet companies, which have tried to get listed — EaseMyTrip has bootstrapped its way to the public markets.

The online travel agency (OTA) offers a range of products and services for end-to-end travel solutions, from airline tickets to rail tickets and bus tickets to taxis, holiday packages, hotels, and much more.

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The best thing about the travel aggregator is the cost-conscious model that sets it aside from other travel aggregators in India.

“Being bootstrapped, the management of the company has tended to be extremely cost conscious and this has enabled them to be profitable since inception. Their primary driver of business is that they do not charge a convenience fee and this is what sets them apart from their peers like Make My Trip, Yatra and ClearTrip,” said Ventura in an IPO note. And that’s why nearly every analyst on the street has a ‘subscribe’ rating on the IPO.

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Here's what makes the IPO hot!

Lean, cost-efficient operations set it aside from peers

According to an ICICI Direct report, EaseMyTrip, owned by Easy Trip Planners Ltd (ETP), had the lowest number of employees among India's key online travel agencies as of March 31, 2020. The company has developed a streamlined, efficient and lean organisation structure relative to the size of its business operations. The advanced technology infrastructure and operating systems focused on optimal human resource allocation, minimising operational and systematic errors and enhancing customer satisfaction have resulted in reducing administration costs while increasing employee productivity and operating efficiencies.

CompanyEasy Trip PlannersMakeMyTripYatra Online
Customer Promotion Expense as a % of Gross Booking Revenue3.00%5.93%1.74%
Employee Expense as a % of Gross Booking Revenue0.72%2.13%2.08%
Other Operating Expense as a % of Gross booking revenue0.27%0.60%1.01%
*Source: Ventura

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“We believe this has enabled ETP to maintain healthy profitability in the past few years,” the report added.

Highest growth rate in terms of gross booking revenue and operating revenues among the Key Indian OTA’s

According to Choice Broking, Easy Trip has been profitable since its inception and is the only profitable company among the key OTAs with a positive return on equity (RoE) and return on capital employed (RoCE). The company’s profit had grown from ₹3 lakh in 2018 to ₹32.9 crores in 2020.

Here is why analysts maintain a bullish mood for the ₹510 crore IPO of bootstrapped online travel aggregator EaseMyTrip
BI India

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As per the red herring prospectus, in terms of annual growth in operating revenues during FY 2018 to FY2020, Easy Trip recorded the fastest growth at a compound annual growth rate (CAGR) of approximately 19%, among key online travel agencies in India like MakeMyTrip Limited and Yatra Online.

The sector is poised to grow

According to Ventura, the company has increased its market share from 3.1% in FY18 to 4.6% in FY20 and has been ranked second among key OTAs in India based on booking volumes.

The online penetration, defined as a share of bookings done online through websites of the service providers or through online travel agencies (OTAs), of the Indian travel industry accounted for 56-58% in FY20. The analysts further expect the share of online penetration to 67-68% in FY23, supported by growth in online transactions due to the Covid-19 pandemic.
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Justified valuations

The ICICI Direct report highlighted that taking cognisance of the huge growth opportunities for EaseMyTrip and a lean cost of operations that would aid the flow of profitability to the bottom line — “it is an attractive issue.”

According to Choice Broking, the company is available at a P/E of 65.3x on FY20 numbers — “which is reasonably priced”. The price-to-earnings (P/E) ratio shows the price that the market is willing to pay for a stock based on its earnings. Higher the P/E, the more expensive the stock.

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