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In modern day India, to cater to the rising demand for travel and tourism, there are a handful of companies. One such listed company is India’s second largest online travel agency (OTA), Easy Trip Planners Limited or EaseMyTrip.com. Established in 2008, the company offers a comprehensive range of travel-related products and services for end-to-end travel solutions.
The company’s products and services are organized primarily in the following 3 segments: Airline Tickets, Hotels & Holiday packages, and Other Services. Most online travel agencies today make the most of their revenue from airline ticket sales. For Easy Trip Planners, this segment constitutes 94% of the revenue generated. However, airline ticket sales are a very low margin business, whereas hotels/holiday packages and other travel products have higher margins.
It also has the largest network of travel agents with around 60,000 registered travel agents across almost all major Indian cities. The company offers a “No Convenience Fee” strategy which helps it to attract many customers. This has resulted in industry leading growth for the company. The company also benefits from a healthy repeat transaction rate of approximately 85%, which has been key in making the company the only profitable player amongst all online travel agencies in India. Easy Trip Planners ranks second in terms of air ticket volume, and third in terms of gross booking revenue and number of registered customers.
The company makes money via performance-linked bonuses, and commissions from Global Distribution System service providers. Select airlines and credit card companies prefer working with EaseMyTrip due to their high sales volume and offer the Company incentives in the process. The Company also earns revenue from convenience fees, cancellation services, rescheduling charges and advertisement revenues.
The Online Travel Agency market is set to grow alongside growth of digital transactions worldwide. Online airline ticketing has grown by approximately 68% and hotel bookings are 20 to 25% higher after COVID-19. Additionally for EaseMyTrip, efficient operations leveraged through technological advancement has reduced employee expenses to 1/3rd of competitors. As for the financial situation of the company, it has net cash balance of approximately 120 crore rupees as of September 2021.
So, what is our view on company valuation?
The company did its IPO at price of 206 rupees in March 2021 and saw massive subscription of 159 times. It listed at a 13% premium to its issue price. The Company has issued a 1:1 bonus in February ’22 and is now trading at nearly 4x its issue price.
Market leader MakeMyTrip trades at Price to Sales Ratio of about 9 times. EaseMyTrip in comparison trades at approximately 40 times. The company is significantly overvalued vis-à-vis its competitors.
As for the risks to this analysis, the Company’s fortunes can be severely impacted by any disruptions to the travel industry as seen during the Covid-19 lockdowns. Moreover, should any competitor offer better technological services, customers are likely to move towards them.
So, would you invest in EaseMyTrip? Share your views in the comments section and like the video if you liked our analysis.
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