Easy Trip Planners has announced a 100 percent interim dividend for the financial year 2021 (FY21), a decision that comes at a time when the second coronavirus wave is pounding India, leaving the tour and travel industry facing uncertainty as restrictions are imposed to curb infections.
The travel agency, which debuted on bourses on March 19, said in a BSE release on April 19 that its "board of directors has declared interim dividend of Rs 21,72,90,000 (100 percent) per equity share of the face value of Rs 2 each for FY21". The record date for the purpose is April 28, 2021. The dividend will be paid or dispatched on or before May 18, 2021.
The announcement may raise questions on how the company sees the road ahead as the resurgence in coronavirus cases will force businesses to save liquidity to meet any exigency but the management is confident.
"Even when the headwinds of the COVID-19 knocked down the industry, we showed the ability to deliver profitable results. In the third quarter of FY21, we bounced back with 70 percent of our booking in the corresponding quarter in the previous fiscal year," CEO and Co-Founder Nishant Pitti said.
The 100 percent interim dividend demonstrated the company's commitment to shareholders to share the rewards of the success, he said. "We believe that we have the only sustainable model in online travel agency (OTA) business and we have shown over time that we can both grow and deliver profits consistently," he said.
Easy Trip Planners is ranked second among the key online travel agencies in India in terms of booking volumes for the nine-month period ended December 2020. It ranks third among the key online travel agencies in India in terms of gross booking revenues in FY20, with a market share of 4.6 percent.
The company's dividend announcement does not seem to have surprised analysts and most of them have faith in the company's growth prospects.
Easy Trip was is one of the only profitable OTAs in India, which had grown at more than 47 percent CAGR for the last three years, Gaurav Garg, Head of Research at CapitalVia Global Research said.
"It has recorded a positive return on equity (RoE) and return on capital employed (RoCE) for three consecutive financial years. The company has been profitable since its inception and looks like one of the promising players to show very good growth once the situation comes back to normalcy in the tourism sector," Garg said.
Binod Modi, Head- Strategy, Reliance Securities, said the total dividend was of about Rs 22 crore. The company followed an asset-light business model and didn't require meaningful cash to run operations.
"The company has sufficient cash to reward shareholders. If you look at the balance sheet of the company, at the end of the December quarter, the total cash it had was around Rs 141 crore. Out of that much money, spending only Rs 22 crore is a good approach to revive the sentiment," Modi said.
"As of now, the company does not have a major expansion plan to get into some other businesses or something so it does not require much cash as of now so it is rewarding shareholders."
The stock listed at Rs 212.25 on the National Stock Exchange, higher by Rs 25 compared to the issue price of Rs 187, while on the BSE, it got listed at Rs 206 at a 10 percent premium.
Since then, the stock has come down from the listing price. In the morning trade on April 20, the stock rose over 3 percent but cooled off soon. At 1150 hours on BSE, the stock was flat at Rs 171.95.
Modi said the stock's underperformance was mainly because of macroeconomic factors.
As the government has announced vaccination for all adults now, experts are hopeful that the COVID-19 pandemic will come under control sooner than expected and with economic revival and lives coming back to normal, industries like travel and aviation will witness healthy growth.Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.