Easy Trip Planners IPO review (May apply)

•    ETPL is in the online travel-related service industry.
•    It gets 85%+ repeat business from the B2C segment.
•    Though it runs profitably, the Retail portion is just 10%.
•    Company may get fancy as the first mover in OTS post listing.
•    Though the issue is fully priced, investment for the long term may be considered.

ABOUT COMPANY:
Easy Trip Planners Ltd. (ETPL) is well known for its online tour web portal EaseMyTrip.com. and EaseMyTrip.in. It is ranked second among the key online travel agencies in India in terms of booking volume. The company has been doing profitable business since its inception and has emerged as the only profitable online travel agency in India based on the last three fiscals financial data.

ETPL offers a complete range of travel-related products and services on a B2B2C basis. Thus it provides end-to-end travel solutions across the board. Its service portfolio covers airline tickets, hotels and holiday packages, rail tickets, bus tickets,  taxi services as well as travel insurance, visa processing etc. The company provides its customers with access to more than 400 international and domestic airlines, over 1096400 hotels across the globe, and the entire railway network of India.

As of December 31, 2020, its travel agent network has 59274 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 costs. 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 1.77 million.

According to company management, it follows the most advanced and latest technology including mobile applications for its operations that helps it for better cost controls and higher yields. This has helped word of mouth publicity for the company resulting in lower customer promotion expenses in percentage terms. Due to this, during the COVID-19 lockdown, it suffered a mild setback but has recovered speedily from FY21 Q2 onwards.

ISSUE DETAILS/CAPITAL STRUCTURE:
To achieve the benefits of listing, visibility and unlocking the brand value, the company is coming out with a maiden IPO by way of offer for sale of equity worth Rs. 510 cr. The issue is for approx 27272800 equity shares (at the upper cap of the price) of Rs. 2 each being offered in the price band of Rs. 186 - Rs. 187 per share. Minimum application is to be made for 80 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE.

The issue constitutes 25.1% of the post issue paid-up equity capital of the company. The issue opens for subscription on March 08, 2021, and will close on March 10, 2021. As the company did not meet with required parameters of listing guidelines, it has kept 75% for QIBs, 15% for HNI and only 10% for Retail investors.

This issue is jointly lead managed by Axis Capital Ltd. and JM Financial Ltd. and KFin Technologies Pvt. Ltd. is the registrar to the issue.

Having issued initial equity at par, it raised further equity in the price range of Rs. 300 to Rs. 600 (on the basis of the Face value of Rs. 2 per share) between October 2015 and January 2015. It has also issued bonus shares in the ratio of 5 for 1 in March 2018 and 2 for 1 in March 2019. The average cost of acquisition of shares by the promoters is Rs. 0.65, Rs. 0.66 and Rs. 3.47 per share.

This being a vanilla offer for sale, ETPL's current paid-up equity capital of Rs. 21.73 cr. will remain the same post issue. With the higher price of the IPO, the company is looking for a market cap of Rs. 2031.66 cr.

FINANCIAL PERFORMANCE
On the financial performance front, on a consolidated basis, ETPL has posted a total income of Rs. 181.01 cr. with a net profit of Rs. 32.98 cr. for FY20. For the first nine months of the current fiscal ended on December 31, 2020, it has earned a net profit of Rs. 30.54 cr. on a total income of Rs. 81.47 cr. For FY20 and 3Qs of FY 21, its trade payables increased from 20.64 cr. to Rs. 56.17 cr. and trade receivables too increased from 10.36 cr. to Rs.21.10 cr. (Refer page 75 of the offer documents). This equation definitely raises concern. For the said periods, its bank deposits declined from Rs. 65.82 cr. to Rs. 31.27 cr. Due to IAS accounting provisioning and write-off for a discontinued business of Bollywood funding plans, its bottom line for FY18 got affected.

On a standalone basis, ETPL has posted a total income/net profit of Rs. 113.57 cr. / Rs. 6.61 cr. (FY18), Rs. 151.11 cr. / Rs. 29.34 cr. (FY19) and Rs. 179.72 cr. / Rs. 34.65 cr. (FY20). For the first three-quarters of the current fiscal, it has earned a net profit of Rs. 31.11 cr. on a total income of Rs. 81.57 cr. Many fold jump in bottom lines for FY19 and FY20 as well as FY21 9M raised eyebrows. For FY20 and 9M-FY21 the company has shown an average EPS of Rs. 2.26 and an average RoNW of 28.08%.

The issue is priced at a P/BV of 15.38 based on its NAV of Rs. 12.16 as of December 31, 2020. If we annualized FY21-9M earnings and attribute it to post issue equity, then the asking price is at a P/E of around 49.87. Thus the issue appears fully priced on these parameters.  

MAJOR CONCERNS:
The company has just around 6% market share and despite this, it is doing profitable business due to effective cost control. It's rising trade receivables and trade payables raise. At the same time, its bank deposits have declined by over 50%.

COMPARISON WITH LISTED PEERS:
As per offer documents, ETPL has no listed peers in India.

DIVIDEND POLICY:
The company has not paid any dividend so far, however, post listing; the company will be contemplating a prudent dividend policy, said management.

MERCHANT BANKERS TRACK RECORDS:
The two Book Running Lead Managers (BRLMs) associated with the offer have handled 23 issues in the past three fiscals, out of which 8 issues closed below the issue price on the listing date.