Easy Trip IPO – Is This Holiday Worth Your Money?

Easy Trip IPO opened on 8th March, 2021 and will remain open till 10th March, 2021. The price band has been fixed at Rs 186 – Rs 187 per share.

By: Tavaga Research

IPO Snapshot

Getting to know Easy Trip

EaseMyTrip (parent company easy trip planner) was co-founded in 2008 by brothers Nishant Pitti, Prashant Pitti, and Rikant Pitti after being conned by a travel agent while booking a trip for their father. The company was originally called, Duke Travels and was later rebranded as EaseMyTrip. In 2011, it started selling directly to customers (business to consumers) and two years later to corporates (business to enterprise).

EaseMyTrip offers deals and discounts on holiday packages, hotel bookings, and flight bookings. The company currently has a growing network of over 30,000 travel agents, a corporate client base of over 800 companies, over 96 lakh registered customers and, a little over 400 dedicated employees.

The company is technologically proactive with an in-house team that focuses on developing secure, advanced, and scalable infrastructure. These constant developments aid the company to maintain its efficient asset-light operations. EaseMyTrip strongly believes in building a user-friendly platform and making travel a cherishable yet economic experience for everyone. 

The CAGR growth of gross bookings from revenue in fiscal 2018-2020 was 47%, which is the highest amongst all the competitors. The company also holds a 4.6% market share in the Indian OTA market as of FY2020.

Objects of the issue

• The company has not seen any external equity infusion since its inception. The issue is an offer by sale by the existing promoters for the sole purpose of listing on the stock exchange.
• The company expects that listing the equity shares will enhance its visibility and brand and provide liquidity to its existing shareholders.
• According to reports, the company has over Rs. 200 crore in cash and the issue will help get a valuation.

Industry Overview

Online travel agencies or OTAs are travel agencies whose primary presence is on digital platforms, such as websites where consumers can book their travel without any human assistance. They use smart pricing strategies, market intelligence software, and real-time insights to provide customers the best possible deal on their reservations. 

International OTAs such as Expedia, Airbnb, and Bookings.com managed to capture a significant chunk of the market demand quickly because of the choices they offered, better pricing, and unmatched user experience. 

India’s OTA industry is estimated to be around $4 billion. With new promising entrants in the ecosystem like OYO and Zostel, this industry is likely to boom. India has always been one of the most attractive international destinations, while before the early 2000s the domestic travel was largely restricted to pilgrimage and visiting friends and family which is no longer the case.

Rise of the OTA Platform

With the internet boom of the 2000s and the inception of the Delhi-based company MakeMyTrip, the OTA battle in India had just started gaining attention. Clear Trip, GoIbibo, Yatra made an entrance in the market, and the frenzy to acquire customers, provide better discounts, and better travel experience began. This rush hugely benefitted the customers and more international players decided to clout the Indian market. 

According to Morgan Stanley, Indians book only 10–15 percent of their hotel stays online, compared to 25–30 percent in China and nearly 50 percent in the US. While 500 million Indians have some form of internet access but only a small percent of these people transact online, while the pandemic hit the travel industry, it was a catalyst for the online transaction portals. 

With increasing trust in online transactions, the slow opening of the economy, and the growing trend to travel and experience different cultures the OTA industry is destined to be successful in the near future.

The balancing act

Positives

• The only listed Indian peer for the company is Makemytrip, which is listed in the US Nasdaq.
• The company has a strong consistent financial track record and operational performance.
• The company also claims that it was the only profitable online travel agency among the key OTAs in India.

Drawbacks

• Low barriers to entry and a highly competitive market, as mentioned the key domestic OTAs are Cleartrip.com, MakeMyTrip Ltd, and Yatra Online.
• The whole industry was significantly impacted by the pandemic. According to research the travel industry as a whole is not expected to recover fully until FY22.
• The commissions received from airlines and GDS service providers are not fixed and can fluctuate easily.

Given the strong financial background and operational efficiency of EaseMyTrip, this IPO is worth looking forward to. However, given the pandemic and the cut-throat competition the company may face some difficulties in the future. 

The above write-up is only for educational/informational purposes.

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