Yatra Online Limited IPO (Avoid)

Highlights

Yatra Online Limited (YOL) as of FY23 is one of India’s largest corporate travel services providers in terms of a number of corporate clients and the third largest online travel company in India among key OTA players in terms of gross booking revenue and operating revenue.

The Company products and services are largely categorized into the following segments – (i) Airline tickets which consist of the sale of airline tickets as well as airline tickets sold as part of the holiday package (ii) Hotels and holiday packages, which consist of standalone sales of hotel room as well as travel packages (which may include hotel rooms, cruises, travel insurance and visa processing (iii) other services, which includes rail tickets, bus tickets, taxi rentals and ancillary value-added services such as travel insurance, visa processing and tickets for activities and attraction.

A comprehensive range of travel and travel-related products and services is offered by the company which caters for the needs of passengers travelling to and from international destinations.

The company’s go-to-market strategy covers both B2C (business to consumer, which includes business to consumer and business to enterprise) and B2B (business to business), including the entire value chain of travel and hospitality. The Company believes that by combining its B2C and B2B channels, they can target India’s most frequent and high-spending travellers, and educate urban customers in a cost–efficient manner.

As of March 31, 2023, the Company’s travel agent network adds scale to their business by leveraging an integrated technology platform to aggregate customer demand from over 29,800 travel agents in over 1,000 cities across India.

The Company will utilize Rs. 1,500 mn of the net proceeds of the new equity issuance for strategic investments, acquisitions and inorganic growth, Rs. 3,720 mn for investment in customer acquisition and retention, technology, and other organic growth initiatives and Rs. 1,730 mn will go towards existing selling shareholders.

Key Highlights

• The travel Industry is currently valued at Rs. 2,825-2845 as of FY23 and it is estimated to grow at 9-11 pct CAGR to Rs. 4,540-4,560 bn by FY28. In the B2B segment Indian OTA industry is currently valued at Rs.42-46 bn and expected to grow at a CAGR of 14-15 pct by FY28. Also the penetration of within the travel market is expected to further increase to 73-75 pct by FY28. Looking at the Industry there is plenty of room available for the company to grow. 
• YOL is the only company in India which offer a freight forwarding program. Also the company has 105,600 Domestic hotels and accommodation tie ups (highest among key domestic OTA players), 2 mn+ international hotels, 7 domestic hotels and 400+ international carriers.
• The Company served over 800 major corporate customers in our corporate travel sector, where their customer retention rate in relation to corporate accounts has improved from 97 pct in fiscal year 2021 to 98 pct in fiscal year 2022 and stays consistent in fiscal year 2023, i.e., 98 pct. Also company recorded a booking success rate of 97.8 pct on their websites and mobile applications in the B2C channel for domestic transactions during fiscal 2023.
• The gross booking has significantly grown 4x from Rs. 15,280 mn in FY 2021 to Rs.67,370 mn as of FY 2023.
• It will continue to invest in branding and services also company expect increased travel within and between Tier 2 and Tier 3 cities to drive growth in air and hotels, by leveraging their existing travel agent network in Tier II and Tier III cities.
• In terms of gross booking revenue, the company is the biggest corporate travel service provider in India, with 813 large corporate customers and over 49,800 registered SME customers, and the third largest consumer online travel company (OTC) in the country for Fiscal 2023.
• Over FY21-23 company sales grown at a CAGR of 74 pct and as of FY23 it stood at Rs.3801 mn. Also the adjusted EBITDA and adjusted EBITDA margin of the company increasing YoY and adjusted margins currently stood at 17.6 pct as compared to 16.23 pct in FY22. After reporting losses for FY21 and FY22, company has turned profitable in FY23.

Key Risk

• Competition risk by existing peers, foreign OTAs and new entrants.
• Company has experienced negative operating cash flows in FY23 and FY22.
• Air India had moved to a single GDS service provider platform for its domestic inventory; There can be no assurance that other airline suppliers will not institute similar measures.

Valuation

Yatra Online is a leading, full-service online travel company in India and one of the well-recognised travel brands in the country, addressing the needs of both leisure and business travellers. The strength of the brand is reflected in the fact that over 90% of the total traffic has come from direct and organic traffic for FY23. Given the size and growth dynamics of the Indian travel market, Yatra Online has strategically focused both on the corporate and consumer markets. 

On the financial performance front, the Company has posted losses for FY21 and FY22 and has turned into profits in FY23. The financial numbers for Q1FY24 have not been disclosed in the offer document. At the higher end of the price band, the issue is demanding a PE of 290x its FY23 earnings and a Market Cap/Sales multiple of 5.86x. The issue looks expensive. AVOID.

Disclaimer: The views expressed in the blog are purely based on our research and personal opinion. Although we do not condone misinformation, we do not intend to be regarded as a source of advice or guarantee. Kindly consult an expert before making any decision based on the insights we have provided.