Yatra Online Ltd IPO
Published by Sharekhan Education | September 18, 2023
By Amit Pathak | Sharekhan Education
In the fast-paced world of travel and hospitality, Yatra Online Ltd is gearing up to make its mark on the Indian market. As the company prepares for its Initial Public Offering (IPO), let’s take a closer look at this prominent Online Travel Agency (OTA) and the opportunities and challenges it presents.
Issue Details:
Issue Size: ₹ 775 Crores
Price Band: ₹ 135-142
Issue Opening Date: Friday, 15th Sept 2023
Issue Closing Date: Wednesday, 20th Sept 2023
Company Overview:
Yatra Online Ltd., has established itself as a significant player in India’s travel and hospitality industry. Its unique go-to-market strategy covers the entire travel and hospitality spectrum, catering to both B2C and B2B segments. The company prides itself on its robust technology platform, designed to offer reliability, security, scalability, integration, and innovation.
What sets Yatra apart is its status as India’s largest corporate travel service provider. It serves 813 large corporate clients and over 49,800 SME customers. Additionally, it offers access to a vast network of hotels and homestays, with approximately 105,600 hotels in India and more than 2 million hotels worldwide.
Objectives of the Issue:
The IPO comprises a fresh issue of equity shares totaling ₹ 602 crores, alongside an offer for sale (OFS) of up to ₹ 173 crores by existing shareholders. The fresh issue’s proceeds will be channeled into customer acquisition and retention technology and strategic investments, acquisitions, and organic growth opportunities. The minimum application requirement is for 105 shares, with subsequent multiples. Post allotment, the shares will be listed on both BSE and NSE.
Industry Outlook:
The Indian travel industry is experiencing robust growth, driven by several factors. Tourism infrastructure growth, rising incomes, and increased business and leisure travel are driving the Online Travel Agency’s expansion. OTAs like Yatra provide a convenient one-stop solution for corporate clients, emphasizing technology for streamlined bookings and competitive pricing comparisons.
As per recent reports, OTA penetration currently stands at 49-50% and is projected to reach 73-75% by FY28. Consequently, the OTA industry is poised for a Compound Annual Growth Rate (CAGR) of approximately 15% from FY23 to FY28.
Competitive Strengths:
Yatra Online Ltd. boasts a strong brand presence in the travel sector, making it one of the most recognized travel brands in India. Its unique blend of B2C and B2B channels enables it to target the country’s most frequent and high-spending travelers, particularly educated urban consumers. This comprehensive approach creates a robust network effect, facilitating cross-selling between business and leisure travelers. The integrated platform ensures a scalable, comprehensive, and consistent user experience, making it a true “one-stop shop” for its customers.
Business Strategy :
Yatra’s business strategy centers on expanding its customer base by continually enhancing its seamless and integrated technology platform. The company plans to leverage its eCash program as an incentive for repeat business from B2C customers and to encourage B2B clients to transact on the B2C platform. Furthermore, Yatra has made strategic acquisitions of companies, intellectual property, and talented individuals central to its growth strategy.
Key Concerns:
While Yatra Online Ltd. holds significant promise, it also faces notable challenges. The competition in the travel industry is fierce, and any future pandemics or widespread health emergencies, like the COVID-19 pandemic, could impact the company’s financial health. Additionally, the company’s reliance on a limited number of Indian airlines exposes it to the risks associated with the domestic airline industry, such as rising fuel costs. The company has also experienced relatively high attrition rates in recent years, which could affect its operational stability.
Financials:
Yatra has exhibited impressive operating revenue growth, with a Compound Annual Growth Rate (CAGR) of 74% over FY21-23. In FY23, the company achieved profitability, registering a Profit After Tax (PAT) of ₹ 7.63 crores. The EBITDA margin for FY23 stood at 17.6%. Segment-wise, the margins were 7.6% for air ticketing and 13% for hotels. However, the Return on Equity (ROE) was relatively modest at 4.5%. Notably, the Net Working Capital Days increased from -8 to 143 over FY21-23. The Debt-to-Equity ratio rose from 0.1 to 0.9 over the same period. At the upper end of the price band (₹ 135-142), the issue appears to be richly priced, with a Price to Earnings (P/E) ratio of 293x based on FY23 earnings per share and mcap/sales of 5.6x.
Source: SEBI Red Herring Prospectus
In conclusion, Yatra Online Ltd. is a noteworthy player in India’s burgeoning travel and hospitality industry. As it ventures into the IPO market, investors and stakeholders will be closely monitoring its performance and ability to navigate the competitive landscape and potential challenges. The company’s success will likely be determined by its capacity to leverage its strengths and adapt to changing market dynamics.
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