The issue is entirely an offer for sale (OFS) by two promoters, who are offering Rs 255 crore worth of shares each, in the price band of Rs 186-187. The IPO is valued at 58.7 times the company’s FY20 earnings, and 49 times FY21 earnings on an annualised basis.
Analysts said that competition in the industry is fierce, and that they believe it would take the travel industry some time to recover from the Covid-19 blues. The liquidity profiles of the carriers, which continue to remain fragile, are essential to the growth in the company’s revenues, they added.
On the positive side, the company’s business is asset-light and scalable, and it has negligible debt on its books, analysts said.
“The primary driver of the Easy Trip business is that it does not charge a convenience fee and this is what sets it apart from peers like Make My Trip, Yatra and Clear Trip. This strategy of the company has paid off handsomely during Covid and has ensured that it gains market share and becomes the second largest company in the market,” said Ventura Capital, which has a ‘subscribe’ rating on the Easy Trip issue.
Easy Trip Planners was ranked second among key online travel agencies in India in terms of booking volume in the nine months to December 31, 2020. In terms of net profit margin, the travel company was the only profitable online travel agency among key online travel agencies in India in FY18-20.
GEPL Capital said it would recommend the IPO for the purpose of potential listing gains only. “We would remain cautious as a long term investment given the competitive intensity, and ambiguity of international travel revival,” it said.
Reliance Securities said the IPO is aggressively priced. The travelling industry is unlikely to recover significantly in FY22, and the company’s involvement in unrelated businesses like coal, movies and share trading — even as Easy Trip discontinued them in FY18 — still raises apprehension, the brokerage said.
“Besides, online travel agency operation is quite fragmented with low entry barriers and hence company is prone for higher competition, which may impact its margins, going forward,” it said.
Choice Broking said that the company’s financial performance on the operating front is inconsistent, considering its market positioning among the key online travel agencies (OTAs), but feels that it has a scalable business model and business growth in excess of the sector, and a cash generation ability. This brokerage has a ‘subscribe’ rating on the issue.
The company has access to 400 international and domestic flights and around 11 lakh hotels within the country and abroad. The travel agency has 96 lakh registered customers and a network of close to 60,000 travel agents.
“We like the strong fundamentals of company as it being the only profitable OTA with highest CAGR growth because of lean and cost efficient operations. Also the fact that company have been able to manage growth through internal accruals since inception depicts the strong management by promoters,” said Astha Jain of Hem Securities.
Nearly 90 per cent of the company’s revenue is from the sale of air tickets while the remaining is from booking of hotel rooms. It has tie-ups with most of the domestic airlines and 23 hotel aggregators. Due to these tie-ups, the company provides attractive deals to travellers and does not charge a convenience fee to customers.
Angel Broking said that despite the coronavirus pandemic, the company was able to report revenue of Rs 50 crore in April-December sales and positive earnings per share of Rs 2.86.
“Competition will always remain a concern for this industry as well as companies, Easy Trip Planners need to compete with Paytm in Air tickets booking and aggregators like OYO in hotel business etc,” it said, suggesting a positive outlook for the online travel company.
SMC gave this IPO a 2.5 rating out of 5. It said that the company is operating an asset-light model of business with negligible borrowings and that investors may consider investing in this IPO with a long-term perspective.
The company’s total income grew 26.2 per cent annually between FY18 and FY20 to Rs 181 crore, and net profit rose by 51.8 per cent to Rs 33 crore. Anand Rathi, Asit C Mehta, Geojit, Canara Bank Securities and BP Equities, meanwhile, gave the issue ‘subscribe’ ratings.
Investors can subscribe to the IPO by betting for a lot of 80 shares or in multiples thereof.
Retail investors can bid for a maximum of 13 lots. The quota for retail investors is fixed at 10 per cent of the net offer. For QIB, the quota is fixed at 75 per cent, and 15 per cent for NIIs. The finalisation of the basis of allotment is likely by March 16 and the initialisation of refunds by March 17. Meanwhile, the crediting of shares in the demat accounts is likely by March 18. If successful, Easy Trip Planners’ listing is likely by March 19.