Easy Trip Planners IPO opens for subscription: Should you subscribe?

"Taking cognisance of the huge growth opportunities for EaseMyTrip and a lean cost of operations that would aid flow of profitability to the bottomline, we recommend subscribe rating to the issue," said ICICI Direct.

At the upper price band of Rs 187, East Trip is available at P/E of 49x (annualised basis on FY21E EPS of Rs 3.8) which is fairly priced, said Geojit, adding with no listed peers and as travel business is expected to pick up its charm going forward, the brokerage assigned a 'subscribe' rating for the issue on a long-term basis considering the wide distribution network, rising digitalisation, negligible debt and asset light business model of the company.

Easy Trip Planners IPO: 10 key things to know before subscribing the issue

Founded in 2008, Easy Trip Planners 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.

The company's products and services are organised primarily in three segments - airline tickets (contributing 94 percent to revenues); hotels & holiday packages (5 percent of revenues) and other services (0.6 percent of revenue).

Easy Trip enjoys wide distribution network with around 59,274 registered travel agents in nine months ended December 2020 with 3 distinct distribution channels namely B2C, B2E and B2B2C and follows a business model of providing its customers with the option of no-convenience fee.

The company has been consistently profitable over the past three years, with its profit growing from Rs 7 crore in FY18 to Rs 35 crore in FY20 driven by recurring other income, mainly comprising of claims written back recovered during the period.

Its revenue grew at a CAGR of 19 percent over FY18 to FY20 driven by increase in rendering of services and other operating revenue.

"We like the strong fundamentals of company as it being the only profitable OTA with highest CAGR growth because of lean & 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. Company's Q3FY21 booking volumes represent 70 percent of booking volumes of Q3FY20 demonstrating robust recovery," said Hem Securities.

"Also with the ongoing vaccination drive we believe that in coming months the airline industry will be back to normalcy & volume will surge which largely benefits the company. Hence, looking after all, we recommend investor to subscribe the issue for short & long term," the brokerage added.

Easy Trip Planners shares traded at more than double premium its issue price in the grey market. The IPO Watch data indicated that it traded at a premium of Rs 170-180 in the grey market, i.e. Rs 357-367 against higher price band of Rs 187.

The company has lowest marketing and sales expense (0.83 percent) as a percentage of its gross booking revenue in FY20 compared to other OTA players.

Between April 1, 2017 and December 31, 2020, company had a repeat transaction rate of 85.95 percent in the B2C channel, which depicts the customer stickiness to use their services again and again, said Geojit. Company's registered customers in the B2C channel increased at a CAGR of 28.24 percent from 5.87 million customers as of March 2018 to 9.66 million customers as of March 2020, and further increased to 10.32 million customers as of December 2020.

The company has sustain high growth in air travel as Indian OTA industry has grown at a CAGR of 20-22 percent FY15 to FY20, while company has outperformed industry by recording growth of 37.31 percent in gross booking revenue from airline tickets in the B2C channel in FY20.

Easy Trip is the only player among the key OTAs in India to record a positive average return on equity (RoE) and return on capital employed (RoCE) of 36 percent and 19 percent respectively over FY18-FY20.

"The company claims that it is using sophisticated technology which is helping them to reduce costs and improve margins. On the valuation front, at the upper price band, the company is reasonably priced. However, company is a niche player in the online travel service segment with an operating asset-light business model. Considering all these factors, we give a subscribe rating on this IPO issue for medium to long term," said BP Equities.

Asit C Mehta as well as Choice Broking also recommended the issue for subscription.

It is expected that the share of online penetration of the Indian travel industry is expected to increase to approximately 67 percent to 68 percent in FY23, supported by growth in online transactions due to the COVID-19 pandemic, the CRISIL report says.

However, amongst all brokerages, GEPL Capital is the only one maintain a cautious stance on the issue.

"The Indian travel market is intensely competitive. The key players in the domestic online travel agency market include Cleartrip Private Limited, MakeMytrip Limited and Yatra Online, Inc. Due to the heightened competitive intensity and ambiguity on the revival of international travel to pre-COVID levels," the brokerage explained.

GEPL recommended a subscribe rating to the issue, for the purpose of potential listing gains only. It said it would remain cautious as a long term investment given the competitive intensity, and ambiguity of international travel revival.

Liquidity profile of the carriers which continues to remain fragile is essential to the growth in the company's revenues, the brokerage added.

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