Easy Trip Planners Ltd. - IPO - Strong Financials - Reliance Securities

About the Company

Easy Trip Planners Ltd. (ETPL), incorporated in 2008, is one of the renowned online travel service providers in India. It is ranked second among the key online travel agencies in India in terms of booking volume. ETPL offers a comprehensive range of travel-related products and services for end-to-end travel solutions, including airline tickets, hotels and holiday packages, rail tickets, bus tickets and taxis as well as ancillary value-added services such as travel insurance, visa processing and tickets for activities and attractions. Its market share in the total Indian online travel agency industry in terms of gross booking revenues and gross booking revenues for airline ticketing segment was ~4.6%, and 5.5% to 6.5%, respectively in FY20. As of December 31, 2020, its travel agent network has 59,274 partners. Besides B2B2C, B2C also provides B2E distribution channels. ETPL provides its customers with the most popular model option of no-convenience fees. Its pricing module has no hidden cost. Due to such novel offerings, ETPL registered more than 85% of repeat transaction rate in the B2C model indicating preference enjoyed by it among loyal customers. For the nine months period ended on December 31, 2020, its gross booking volume touched 1.77mn.

Financials in Brief

ETPL reported steady improvement in its financials over the years. While revenue recorded 19% CAGR through FY18-FY20, EBITDA and net profit clocked 105% and 129% CAGR, respectively during the same period. A sharp improvement in earnings is primarily on account for over 2,420bps jump in EBITDA margin over FY18-FY20. Despite high working capital, its balance sheet looks to be strong with zero debt status. ETPL has been a profit-making company and generated accumulated FCF of Rs1.87bn over FY18-9MFY21.

Our View

The IPO is valued at 58.7x and 49x EPS for FY20 and annualized FY21, respectively and 15.2x of current book value, which look to be aggressively priced. We believe that travelling industry is unlikely to recover significantly in FY22E. Further, ETPL's involvement in unrelated businesses like coal, movies and share trading (though ETPL discontinued these in FY18) still raises apprehension. Besides, online travel agency operation is quite fragmented with low entry barriers and hence company is prone for higher competition, which may impact its margins, going forward.

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Source : Equity Bulls

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