IPO-bound Yatra bets on travel boom, freight

Dhruv Shringi, chief exectutive officer, Yatra Online. Travel tech startup Yatra to launch IPO in September.

Ahead of its initial public offering (IPO), travel-tech startup Yatra stated that it is betting big on the growth expected in the travel industry at a CAGR (compound annual growth rate) between 9-11 percent over the next five years. The company is also focusing on the new freight segment to drive revenues.

The Indian travel industry grew at six to eight percent CAGR between FY17 to FY23, to a size of Rs 2,82,500-2,84,500 crore, according to a Crisil report. This growth momentum is expected to continue as the industry is estimated to reach Rs 4,54,000-4,56,000 crore by FY28, driven by tourism infrastructure development, rising income levels translating to higher discretionary spending on travel and tourism, increase in frequency of travel business and leisure purposes, reforms in visa and increase in connectivity across means of transport,  the report said.

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"Within travel, domestic aviation is the key driver. The airlines are adding incremental aircrafts in the country. Today, we have less than 700 aircrafts in India and we have more than twice that number on order right now. So, we will see tremendous amount of fleet expansion which will happen over the course of next 10 years," said Dhruv Shringi, chief executive officer, Yatra Online, during a press conference.

He added, "We are also seeing lot of growth in terms of airport infrastructure. We are seeing newer airports being opened in tier II, III cities and we are seeing large scale airport expansion happening in the big metro cities. Travel and infrastructure for travel is going up substantially."

Travel is no more limited to top 5-10 cities as they are seeing high demand coming from at least 25-30 cities in India, the CEO highlighted. "We will use our 30,000 agents to go deeper in the tier II, III markets as we see expansion of airports happening in these places."

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The air ticketing segment, which logged a CAGR of 8.5-9.5 percent between FY17 and FY23, has a 50-52 percent share of the Indian travel market as of FY23. The growth momentum is expected to continue till FY28 at 12-13 percent CAGR. Air ticketing is expected to continue dominating the Indian travel market as of fiscal 2028, as per the report.

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Shringi attributed the growth in the industry to the changing consumer behaviour, which is largely shifting online. Online penetration, which is defined as share of bookings done online, of the Indian travel industry currently stands at 66-68 percent as of FY23 versus 59-61 percent in FY20. It is expected to increase to 73-75 percent by FY28, noted the report cited above.

"In terms of customer buying behaviour, Covid has been a big driver of online adoption. This is helping both B2B (business to business) and B2C (Business to customer) part of Yatra’s business. Hybrid working has been a force multiplier when it comes to adoption of tech and we are seeing a big flip on account of this in business travel. We expect business travel to grow between 14-15 percent CAGR over the next 5 years," Shringi.

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The online ticketing market, from its size in FY23 at Rs 1,90,000 - 1,92,000 crore, is expected to grow 1.75 times to Rs 3,33,500 crore– 3,35,500 crore by FY28.

Along with travel, Yatra is also looking at growing a new segment-- freight. "We are also building freight solution for corporate customer. Some of our large customers including Havells, SRF. These are the companies that are spending hundreds of crores on freight a year. So, we re building out this (technology-enabled digital freight forward platform) solution for next 5-10 years. This is a new initiative. It will be a great revenue driver," Shringi said.