Easy Trip Planners initial public offering (IPO) will open for subscription on Monday, making it the tenth public issue to enter Dalal Street so far in 2021. The online travel agency is looking to raise Rs 510 crore through the IPO which will entirely be an Offer For Sale (OFS) by existing shareholders. Post issue, the promoter shareholding will come down to 74.9% from 100% pre-IPO and public shareholding will increase to 25.1% from zero. The issue will remain open for subscription till March 10.
About the issue
Investors can subscribe to Easy Trip Planners IPO in the price band of Rs 186-187 per share, in a bid lot of 80 shares and multiples thereafter. This translates to a minimum investment of Rs 14,960 per lot. Through the issue, 2.73 crore shares of the company will be on offer. Of the total issue, 75% is reserved for Qualified Institutional Buyers (QIB), 15% for NIIs and only 10% for retail investors. The objective of the issue is to list the company on the bourses and provide liquidity for the existing investors. Easy Trip Planners will not be getting any funds raised through the IPO process.
Ahead of the IPO, Easy Trip has already raised Rs 229 crore anchor investors, allotting them 1.2 crore equity shares at Rs 187 apiece. Data available on BSE shows that among marquee global investors, Nomura Funds Ireland Public Limited and HSBC Global Investment are among the 35 anchor investors of the firm. Tata Trustee Company, Aditya Birla Sunlife Insurance Company, Sundaram Mutual Fund, Bajaj Allianz Life Insurance Company and Nippon Life India Trustee Company have also invested through the Anchor Book portion.
The company could lure investors in with its healthy financial track record. Easy Trip Planners has been consistently profitable over the past three years, with its profit growing from Rs 7crore in the fiscal year 2018 to Rs 35 crore in the previous financial year. The gross booking revenue of the firm comes 98% from airline tickets and 1% each from Hotel & holiday packages, and other sources. In terms of revenue from contracts with customers, 94% of the revenue was from air passage, 5% from hotel packages, and 1% from other services.
“On the back of rapid growth in the travel & tourism sector over FY17-20, the company has reported a consistent track record of business growth. But there is huge volatility in the profitability,” said Choice Broking a note. However, analysts at Geojit Financial Services highlighted that the company remains the top pick for customers to return to with a repeat transaction rate of ~85.7% in the previous financial year.
Hit by the pandemic, Easy Trip Planners reported a 56.3% and 61.6% on-year drop in the gross booking volume and revenues. However, in the first nine months of the current fiscal year, Easy Trump has managed to report a net profit of Rs 31 crore.
Key risks associated with the firm include its high dependence on airline ticketing business from a small number of airlines and competition from other established and emerging players in the travel industry, according to Geojit Financial Services. Choice Broking, on the other hand, sees subdued macroeconomic environment and unfavourable business-mix as risks along with the above-mentioned ones.
Valuation and rating
Choice Broking said that at the higher price band of Rs. 187, Easy Trip is demanding a P/E multiple of 58.6x. Though raising doubts over its financial performance at the operating levels, the brokerage firm feels that the company has advantages like a scalable business model, business growth in excess of the sector, cash generation ability and hence assign a ‘Subscribe’ rating to the company. Geojit Financial Services also a ‘Subscribe’ rating, valuing it at a P/E of 49x (annualized basis on FY21E EPS of Rs.3.8) which they said makes the IPO fairly priced.