Yatra Online
- Yatra Online is coming out with a 100% book building; initial public offering (IPO) of 5,67,75,691 shares of Rs 1 each in a price band Rs 135-142 per equity share.
- Not less than 75% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not more than 15% of the issue will be available for the non-institutional bidders and the remaining 10% for the retail investors.
- The issue will open for subscription on September 15, 2023 and will close on September 20, 2023.
- The shares will be listed on BSE as well as NSE.
- The face value of the share is Rs 1 and is priced 135.00 times of its face value on the lower side and 142.00 times on the higher side.
- Book running lead managers to the issue are SBI Capital Markets, DAM Capital Advisors and IIFL Securities.
- Compliance Officer for the issue is Darpan Batra.
Profile of the company
The company is India’s largest corporate travel services provider in terms of 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, for Fiscal Year 2023. It has largest number of hotel and accommodation tie-ups amongst key domestic OTA players of over 2,105,600 tie-ups, as on March 31, 2023. The company is the leading 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 in terms of gross booking revenue for Fiscal 2023. The company’s go-to-market strategy spans the entire value chain of travel and hospitality covering B2C (business to consumer) and B2B (business to business which includes business to enterprise and business to agents). The combination of its B2C and B2B channels enable it to target India’s most frequent and high spending travellers, namely, educated urban consumers, in a cost-effective manner. Over 800 large corporate customers of the company employ over 7.00 million people who along with their families form a large part of the consuming upper middle class of India. In addition, its travel agent network provides additional scale to its business by leveraging its integrated technology platform in order to aggregate consumer demand from over 29,800 travel agents in above 1,000 cities across India as of March 31, 2023.
Leisure and business travellers use the company’s mobile applications, its website, www.yatra.com, and its other offerings and services to explore, research, compare prices and book a wide range of travel-related services. These services include domestic and international air ticketing on nearly all Indian and international airlines, as well as bus ticketing, rail ticketing, cab bookings and ancillary services within India. It also provides access through its platform to hotels, homestays and other accommodations, with about 105,600 hotels in 1,490 cities and towns in India, as on Fiscal 2023 and more than two million hotels globally, which is the highest hotel inventory amongst key Indian OTA players. To ensure that its service is a “one-stop shop” for travellers, it also provide its customers with access to holiday packages and other activities such as visa facilitation, tours, sightseeing, shows, and events.
Proceed is being used for:
- Strategic investments, acquisitions and inorganic growth.
- Investment in customer acquisition and retention, technology, and other organic growth initiatives.
- General corporate purposes.
Industry overview
The Indian travel industry was estimated at Rs 2,825-2,845 billion in fiscal 2023. Led by a growing economy, geographical and cultural diversity, and various government initiatives, the Indian travel industry grew at 6-8% CAGR between fiscal 2017 to 2023, to a size of Rs 2,825-2,845 billion. The growth momentum is expected to continue. It expect the industry to grow annually by 9-11% to Rs 4,540-4,560 billion by fiscal 2028, driven by development of tourism infrastructure, rising income levels translating to higher discretionary spending on travel and tourism, increase in frequency of travel business and leisure purposes, reforms in visa and increase in connectivity across means of transport. The Indian travel industry is expected to grow at a 9-11% CAGR, expanding to Rs 4,540 billion - 4,560 billion in fiscal 2028 from Rs 2,825-2,845 billion in fiscal 2023, driven by development of tourism infrastructure, rising income levels translating into higher discretionary spending on travel and tourism, and an increase in the frequency of travel for business and leisure purposes. Online penetration within the industry is expected to reach 73-75%. As a result, the online travel market in India is estimated to grow to Rs 3,335 billion – 3,355 billion in fiscal 2028 from Rs 1,900 – 1,920 billion in fiscal 2023, or at a 11.5-12.5% CAGR. Within the online travel market, the share of OTAs is expected to increase faster than captive players.
In fiscal 2023, the Indian online ticketing market is estimated to be worth Rs 1,900-1,920 billion, registering 12.5-13.5% CAGR from Rs 900-920 billion in fiscal 2017. Growth can be attributed to theincreasing penetration of internet and smart phones. Other enabling factors include growing share of low-cost airlines, increasing popularity of online railway ticket booking system, and convenience that online bookings offer. However, the online ticketing industry is not without its share of challenges. Travellers’ concern about security of their personal information and online financial frauds are the key challenges that require to be addressed effectively in order to ensure seamless transition from offline to online channels. The industry from its size in fiscal 2023 (Rs 1,900 billion - 1,920 billion) is expected to grow to 1.75 times (Rs 3,335 billion – 3,355 billion) by fiscal 2028, at a CAGR of 11.5-12.5%.
Pros and strengths
Trusted brand with a proven track record and targeted marketing strategy: The company 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. Its leading market position and operational history have led to widescale recognition of the “Yatra” brand in India which enables it to target new customers who are coming into the category and also helps to provide better leverage when contracting with airlines and hotel suppliers. Its brand has received numerous awards and recognitions, including multiple awards from the Government of India’s Ministry of Tourism, The Economic Times Best Brands 2022, Yatra for Business – Top Business Travel Partner by Singapore Tourism Board, Best Email Marketing Campaign and Best Email Marketing B2C Brand Promotions at Digital Dragon Awards 2022. The Economic Times Brand Equity’s Most Trusted Brand Survey 2016, Travel and Hospitality’s Most Outstanding Travel Company, National Tourism Award for “Best Domestic Tour Operator” in Category I (Rest of India) & “Best Inbound Tour Operator” for 2017-18 and the CNBC Awaaz Travel Award in year 2018.
Large and Loyal Customer Base: The company has served over 14 million cumulative travel customers as of March 31, 2023, with over half of them having signed up for its eCash loyalty program. Its websites, and mobile applications have been designed to provide customers with flexibility in choosing travel options. It recorded a booking success rate of 97.8% on its websites and mobile applications in the B2C channel for domestic transactions during fiscal 2023. It is dedicated to ensuring a superior user experience on its platform and a critical component of that is customer service. It provides customer support in all stages of its customers’ trips before, during and after. Its “chat” system is an important means of communication between buyers and sellers, buyers and its customer service and sellers and its seller support. It monitor feedback from its customers using an in-house CRM system that helps to provide simple, tailor-made tools to provide rapid and effective support.
Synergistic Multi-Channel Go to Market approach for Business and Leisure Travelers: The company has designed a unique “go-to-market” strategy that is a mix of B2C and B2B. This comprehensive approach creates a robust network effect resulting in cross-sell between business and leisure travellers. It is India’s largest corporate travel services provider in terms of 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, for Fiscal 2023. Its broad and diverse offerings provide it with considerable cross-selling opportunities across business channels and its eCash program furthers customer loyalty across channels, builds a diversified customer base. These channels enable it to provide end-to-end travel solutions for passengers travelling domestically and internationally. Its B2C distribution channel commenced operations in 2006 and focuses on the growing Indian middle-class population and their increasing travel requirements, and provides them with travel products and services through its websites and mobile applications.
Integrated Technology Platform: The company utilizes a single data center with an active data center backup in a separate location and also utilize cloud services with an ability to restore all site operations within 48 hours in case of a complete shut-down. The technology stack includes Java, MySQL, MongoDB, Redis, Memcache, jQuery with a 3-tier service-oriented architecture for horizontal scale, performance and flexibility. It leverages and contributes to open-source technologies, leading to faster innovation, development and cost-efficiencies. It uses an integration layer for high-scale, fault tolerance and configurability with connectivity to multiple GDS and hosting systems for low-cost carriers. This provides auto switching capabilities and redundancy between suppliers so that it may provide the same airline inventory even if a supplier is experiencing connectivity or performance issues. It has also developed a common user interface platform that ensures a single common user view across B2C and B2B channels and a single customer/client interface on both the web and mobile interfaces so that users have a consistent experience irrespective of the channel via which they come to it.
Risks and concerns
Derive significant portion of Adjusted Margin from B2B business: It derives a significant portion of its Adjusted Margin from B2B business. The increased use of teleconference and video-conference technology by businesses could result in decreased business travel as companies increase the use of technologies that allow multiple parties from different locations to participate at meetings without travelling to a centralized meeting locations There was a significant increase in use of teleconference and video-conference technology during the COVID19 pandemic. Increased use of telepresence equipment has induced the culture of work from home leading to reduction in business related travel. To the extent that such technologies play an increased role in day-to-day business and the necessity for business-related travel decreases, demand for hotel rooms or travel related demand may decrease from business travellers and corporate customers. Its business was adversely impacted due to onset of COVID-19 pandemic during Fiscal 2021. However, its demand from B2B business comprising demand from business travellers and corporate customers increased during. While there has been an increase in contribution to total booking value and contribution to total Adjusted Margin by B2B business in last three Fiscals, it cannot assure that this trend will continue.
Dependent on airline ticketing business: The company’s growth strategy is heavily dependent on the continued expansion of its Air Ticketing business and its airline supplier relationships. It currently provide its customers with access to seven domestic airlines as well as to major international airlines; however, in last three fiscals, a substantial portion of its Air Ticketing revenue is represented by four domestic airlines comprising Indigo, Vistara, Air India and one of the domestic airlines, which recently filed an application for voluntary insolvency resolution proceedings before the National Company Law Tribunal. Because the majority of the domestic Indian air travel industry have been concentrated among these domestic airlines, any adverse market developments across the Indian commercial aviation landscape, particularly among the most dominant domestic airlines are more likely to impact its business. For example, the COVID-19 pandemic and the measures implemented to contain the pandemic have had, and any resurgence of the COVID-19 pandemic, spread of any new variant of COVID-19, or spread of any other epidemic may have, a significant negative effect on the Indian air travel industry, the dominant domestic airlines and, by extension, its business, financial condition, results of operations, cash flows and liquidity have also been materially and adversely affected.
Face competition: The Indian travel industry is highly competitive. Its success depends upon its ability to compete effectively against numerous established and emerging competitors, including other online travel agencies, or OTAs, traditional offline travel companies, travel research companies, payment wallets, search engines and meta-search companies, both in India and abroad, such as Cleartrip, Easy Trip Planners, Thomas Cook India, FCM Travel Solutions (India), GBT India, CWT India, MakeMyTrip (India), and Le Travenues Technology and in each case including their affiliated and group entities. Its competitors may have significantly greater financial, marketing, personnel and other resources than it has. Factors affecting its competitive success include price, availability of travel products, ability to package travel products across multiple suppliers, brand recognition, customer service and customer care, fees charged to customers, ease of use, accessibility, reliability and innovation. If it is not able to compete effectively against its competitors, its business and results of operations and cash flows may be adversely affected.
Business depends on relationships with broad range of travel suppliers: The company relies significantly on its relationships with airlines, hotels, railways, bus lines, activity vendors, GDS service providers and other travel suppliers to enable it to offer its customers comprehensive access to travel services and products. Adverse changes in any of its relationships with travel suppliers, or the inability to enter into new relationships with travel suppliers, could reduce the amount of inventory that it may be able to offer. While there have been no material changes in the company’s relationship with travel suppliers or change in its ability to enter into new relationship with travel suppliers, in last three fiscals, however such instances may happen in the future which may have a material adverse impact its business, financial or operational performance. Its arrangements with travel suppliers are not typically subject to long-term commitments and may not remain in effect on current or similar terms, and the net impact of future pricing options may adversely impact its revenue.
Outlook
Incorporated in 2005, Yatra Online provides information, pricing, availability, and booking facilities for domestic and international customers. The company provides domestic and international air ticketing on Indian and international airlines, as well as bus ticketing, rail ticketing, cab bookings, and ancillary services within India, hotels, homestays, and other accommodations bookings, with about 105,600 hotels in 1,490 cities and towns in India, as on Fiscal 2023 and more than two million hotels globally through its website yatra.com, mobile applications, corporate SaaS platform, and other associated platforms. It has over 94,000 hotels and homestays contracted in approximately 1,400 cities across India as well as more than 2 million hotels around the world. The company is India's largest platform for domestic hotels. Yatra Online recently launched a freight forwarding business called Yatra Freight to further expand its corporate service offerings. On the concern side, Travel and tourism services involve many risks that may adversely affect its operations, and the availability of insurance is therefore fundamental to its operations. While it has obtained insurance policies covering risks including office infrastructure, fire and allied perils (building and contents), commercial general liability policy, professional liability covers etc., the company does not maintain any product liability insurance policy.
The issue has been offered in a price band of Rs 135-142 per equity share. The aggregate size of the offer is Rs 766.47 crore to Rs 806.21 crore based on lower and upper price band respectively. On the financial front, total income increased by 81.65% from Rs 2,188.10 million in Fiscal 2022 to Rs 3,974.65 million in Fiscal 2023. The company’s restated profit during the year ended March 31, 2023 was Rs 76.32 million as compared to a restated loss of Rs 307.86 million in the year ended March 31, 2022. Meanwhile, it intends to grow its customer base by continuing to provide business and leisure travellers, a seamless and integrated technology platform that meets all their travel needs. The company intends to continue to leverage its corporate and supplier relationship to offer more solutions to its corporate clients. By leveraging Yatra Online’s robust relationship with air-carriers, large corporate and SME customers it will be able to provide a technology-enabled digital freight forward platform which will cover ocean freight, surface logistics and air Cargo.
