Easy Trip Planners IPO: Motilal Oswal Has A “Subscribe”

Easy Trip Planners Limited (ETPL) is the 2nd largest Online Travel Agency (OTA) in India in terms of booking volume (9MFY21) and 3rd largest in terms of gross booking revenues (GBR; FY20). It is the only profitable OTA in India over last three years, in terms of net profit margin.

According to Motilal Oswal report, ETPL has built a strong customer connect by providing them with the option of no-convenience fee, while avoiding any hidden cost in the final price along with differentiated customer approach.

"This is well reflected in its growing customer base (28% CAGR over FY18-20), repeat transaction rate of 86% and increase in mobile traffic from 65% in FY18 to 81% in FY20. Thus its overall market share among OTAs have improved from 3.1% in FY18 to 4.6% in FY20. Given the rising internet penetration, growing share of low cost airlines and convenience of online booking, India's OTA industry is expected to grow at a CAGR of 3-4% by FY23 which offers further room for ETPL to gain market share," Motilal Oswal report has stated.

ETPL plans to sustain high growth in air travel by further boosting its international air travel. It also intends to expand its Hotel and Holiday Packages segment which enjoys better margins vis-a-vis air ticketing segment. Thus it recently incorporated subsidiaries in U.K., U.A.E. and Singapore to garner higher share from international travel. The revenue contribution from this segment has increased to 5.4% in FY20 from 2.7% in FY19 and is expected to rise further.

Cost efficient operations with steady improvement in financials:

"ETPL has been profitable since inception given its exteme cost conscious strategy. It has the lowest employee cost and marketing and sales cost vis-à-vis its peers. While it GBR saw highest CAGR of 47% over FY18-20 (Makemytrip/Yatra: 20%/-4%).Its revenue/PAT grew at CAGR of 19%/123% over FY18-FY20, while it turned EBITDA positive in FY20 with margin of 7.2%. Despite sharp slump in revenue in 9MFY21, its EBITDA margin improved markedly to 22.7%. In Q3FY21, its booking volumes recovered to 70% of Q3FY20 (MakeMyTrip/ Yatra: 46%/44%). Given its lean balance sheet, it has been a consistent FCF positive company since FY18 and enjoys superior return ratios of 40%," Motilal Oswal has stated.

Valuation & View

"We like ETPL given its lean business model, differentiated offering and strong customer connect. However the travel industry which was significantly impacted due to Covid-19, is likely to take much longer time to revive; though recovery is visible and vaccination drive would further propel it. The issue is valued at 49.9x FY21E P/E on an annualized basis. Being the first in the segment to get listed in India, ETPL could generate high investor interest. Thus we recommend Subscribe to the IPO," the brokerage firm has stated.