Yatra Online, one of India’s leading online travel companies, is set to launch its initial public offering (IPO) on September 15, 2023. The company, which provides information, pricing, availability, and booking facilities for domestic and international customers, aims to raise up to Rs 775 crore from the issue. The IPO will comprise a fresh issue of 4.24 crore shares aggregating to Rs 602 crore and an offer for sale of 1.22 crore shares aggregating to Rs 173 crore by its parent company, Yatra Online Inc., which is listed on NASDAQ.
The price band for the IPO has been fixed at Rs 135-142 per share, with a lot size of 105 shares and its multiples thereafter. The issue will close on September 20, 2023, and the shares are expected to be listed on BSE and NSE on September 29, 2023. The company has appointed SBI Capital Markets Limited, Dam Capital Advisors Ltd (Formerly Idfc Securities Ltd), and Iifl Securities Ltd as the book-running lead managers for the IPO, while Link Intime India Private Ltd is the registrar for the issue.
Why is Yatra Online going public?
Yatra Online, which was incorporated in 2005, claims to be India’s largest corporate travel service provider and the third-largest online travel company based on its gross booking and operating revenues for FY23. The company has over 94,000 hotels and homestays contracted in about 1,400 cities across India as well as more than 2 million hotels around the world. It also offers flight bookings, holiday packages, bus tickets, train tickets, car rentals, visa services, and travel insurance.
According to the draft red herring prospectus (DRHP) filed by the company with the Securities and Exchange Board of India (SEBI), the main objectives of the IPO are:
- To achieve the benefits of listing equity shares on the stock exchanges
- To carry out the offer for sale by THCL
- To enhance its brand name and create a public market for its equity shares in India
The company also intends to use the net proceeds from the fresh issue for:
- Repayment or prepayment of certain borrowings availed by it
- General corporate purposes
How has Yatra Online performed financially?
Yatra Online has reported a mixed financial performance in the past few years. The company’s revenue from operations increased from Rs 1,034.6 crore in FY19 to Rs 1,230.9 crore in FY21, registering a compound annual growth rate (CAGR) of 9.2%. However, its net loss widened from Rs 40.7 crore in FY19 to Rs 101.8 crore in FY21, mainly due to higher expenses related to employee benefits, marketing and promotion, depreciation and amortization, finance costs, and impairment losses.
The company’s revenue from operations was severely impacted by the COVID-19 pandemic in FY20 and FY21, as travel restrictions and lockdowns affected its business segments. The company’s revenue from operations declined by 46.5% year-on-year (YoY) in FY20 and by 13.7% YoY in FY21. The company’s net loss also increased by 87.4% YoY in FY20 and by 37% YoY in FY21.
The company’s earnings before interest, tax, depreciation, and amortization (EBITDA) margin improved from -0.9% in FY19 to 0.8% in FY21, mainly due to cost optimization measures taken by the company during the pandemic. The company’s cash flow from operations also turned positive in FY21, amounting to Rs 28.6 crore, compared to negative cash flows of Rs -67.9 crore and Rs -29.4 crore in FY19 and FY20 respectively.
The company’s total assets stood at Rs 1,062.8 crore as of March 31, 2021, while its total liabilities were Rs 1,009.4 crore. The company’s net worth was Rs 53.4 crore as of March 31, 2021.
What are the risks and challenges faced by Yatra Online?
Yatra Online operates in a highly competitive and dynamic online travel industry in India, which is dominated by players such as MakeMyTrip, Cleartrip, EaseMyTrip, Goibibo, ixigo, OYO Rooms, Airbnb, Booking.com, Expedia.com, etc. The company faces intense competition from these players on various factors such as pricing, quality of service, customer loyalty programs, etc.
The company also depends heavily on its air ticketing business segment, which accounted for about 80% of its revenue from operations in FY21. The air ticketing business segment is subject to various risks such as fluctuations in airfares, commissions, fuel surcharges, taxes, regulatory changes, airline defaults, etc. The company also faces the risk of losing its customers to direct bookings on airline websites or mobile applications.
The company’s business is also affected by seasonality, macroeconomic conditions, consumer preferences, technological disruptions, cyberattacks, data privacy breaches, legal and regulatory compliances, etc. The company may also face difficulties in expanding its international operations, diversifying its revenue streams, maintaining its brand image, retaining its key personnel, managing its working capital, etc.
What are the growth opportunities and strategies for Yatra Online?
Yatra Online believes that it has significant growth opportunities in the online travel industry in India, which is expected to grow at a CAGR of 14.8% from 2019 to 2025, reaching $55.7 billion by 2025, according to a report by RedSeer Consulting. The company expects to benefit from the increasing internet penetration, smartphone adoption, rising disposable income, growing middle-class population, changing travel behavior, etc. in India.
The company also aims to leverage its strong position in the corporate travel segment, which accounted for about 60% of its revenue from operations in FY21. The company claims to have over 1,000 corporate customers across various sectors such as IT, BFSI, manufacturing, etc. The company plans to increase its market share in the corporate travel segment by offering customized solutions, value-added services, loyalty programs, etc.
The company also intends to grow its hotel and holiday packages business segment, which accounted for about 20% of its revenue from operations in FY21. The company plans to increase its hotel inventory, offer attractive deals and discounts, enhance its customer experience, etc. The company also aims to tap into emerging segments such as homestays, alternative accommodations, experiential travel, etc.
The company also seeks to expand its international presence by entering new markets, forming strategic partnerships, acquiring or investing in other online travel companies, etc. The company currently operates in 11 countries across Asia-Pacific, the Middle East and Africa regions.
The company also focuses on enhancing its technology platform, which enables it to offer a seamless and user-friendly booking experience to its customers across various devices and channels. The company also invests in data analytics, artificial intelligence, machine learning, etc. to improve its operational efficiency, customer engagement, personalization, etc.
Should you invest in Yatra Online IPO?
Yatra Online IPO is one of the most awaited IPOs in the online travel space in India. The company has a strong brand name, a large customer base, a diversified product portfolio, a robust technology platform, etc. The company also has a favorable growth outlook, given the recovery in the travel industry post-pandemic and the increasing demand for online travel services in India.
However, the company also faces several risks and challenges such as high competition, low profitability, high dependence on the air ticketing business, regulatory uncertainties, etc. The company’s valuation also seems to be on the higher side, compared to its peers such as EaseMyTrip and MakeMyTrip.
Therefore, investors should weigh the pros and cons of investing in Yatra Online IPO carefully before making a decision. Investors should also consider their risk appetite, investment horizon, financial goals, etc. before investing in any IPO.
This post Yatra Online IPO: A Bumpy Ride or a Smooth Journey? was originally published at Finance Crave
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