ECOS (India) Mobility & Hospitality
- ECOS (India) Mobility & Hospitality is coming out with a 100% book building; initial public offering (IPO) of 1,80,00,000 shares of Rs 2 each in a price band Rs 318-334 per equity share.
- Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
- The issue will open for subscription on August 28, 2024 and will close on August 30, 2024.
- The shares will be listed on BSE as well as NSE.
- The face value of the share is Rs 2 and is priced 159 times of its face value on the lower side and 167 times on the higher side.
- Book running lead managers to the issue are Equirus Capital and IIFL Securities.
- Compliance Officer for the issue is Shweta Bhardwaj.
Profile of the company
ECOS (India) Mobility & Hospitality is the largest and most profitable chauffeur driven mobility provider to corporates in India, in terms of revenue from operations and profit after tax for Fiscal 2023. The company is primarily engaged in the business of providing chauffeured car rentals (CCR) and employee transportation services (ETS) and have been providing these services to corporate customers, including Fortune 500 companies in India, for more than 25 years. In Fiscal 2024, it provided CCR and ETS to 42 Fortune 500 companies and 60 BSE 500 companies, among others, in India. The CCR segment is a B2B2C business, where its customers are corporate companies, and the end consumer is an employee, client, guest or visitor of these corporate companies. The company’s operations in 97 cities in India are conducted through vendors. The company addresses the global car rental requirements of its corporate customers, through its global network of vendors with its capability of providing CCR services in over 30 countries. It also provides cars of self-drive basis in the cities of Delhi, Gurugram, Mumbai and Bengaluru. It has also provided self-drive cars outside India through vendors.
The company operates a fleet of more than 12,000 economy to luxury cars, mini vans and luxury coaches. It also provides specialty vehicles such as luggage vans, limousines, vintage cars and vehicles for accessible transportation for people with disabilities. It has increased its focus on premium vehicles due to increasing customer preference for premium vehicles and the number of CCR bookings for premium vehicles in its fleet has increased from 60,979 bookings, constituting 28.53% of its CCR bookings in Fiscal 2022 to 168,261 bookings constituting 35.46% of its bookings in Fiscal 2024. The company operates its fleet of vehicles on an asset light model, where it strives to keep the number of the vehicles which it owns in its fleet significantly lower than the vehicles which are sourced from its vendors.
The company’s customers benefit from its dual offerings of CCR and ETS, as these segments together provide a comprehensive solution for their corporate transportation requirements. By catering to the corporate transportation requirements of its corporate customers, its two business segments create a synergy by offering its corporate customers a seamless transportation experience and by providing the company with an opportunity to cross-sell its services to its customers in each segment. Its CCR and ETS generate significant benefits from targeting two distinctive segments but sharing the same systems and administrative infrastructure. It provides services to its customers operating in a range of industries including information technology, business process outsourcing, consultancy, healthcare, e-commerce, pharmaceutical, legal and manufacturing.
Proceed is being used for:
- Achieving the benefits of listing the equity shares on the stock exchanges
- Carrying out the offer for sale of up to 18,000,000 equity shares
Industry overview
India’s Corporate Car Rental market in CY2023 reveals a focus on essential business needs, with corporate travel, airport transfers dominating at $3.6 billion accounting for a total of 75.3% of total revenue. Followed by corporate travel, three segments namely event-based travel, corporate conventions, and sports & government account for a total of $0.98 billion with respective shares of 9.6%, 6.2%, and 5.0% revenue. This data suggests a business prioritizing core travel needs, while gradually returning to event-based activities and leisure travel. The corporate mobility sector is undergoing a significant transformation, with a clear shift towards a more formalized and organized structure. While the market has traditionally been fragmented with local, unorganized players, several factors are driving migration towards becoming organized especially through consolidation.
The retail mobility market is categorized into three segments names retail car rental, self-drive car rental, and ride hailing. The retail car rental business is estimated at Rs 336.8 billion ($4.1 billion) in CY2023, while the ride-hailing business dominates the retail mobility segment. Retail car rental is expected to post a tremendous growth of 9.2% CAGR between CY2023 and CY2030 to hit Rs 623.1billion ($7.5 billion) annual revenue. This reflects a continued preference for the convenience and status associated with chauffeur-driven services, particularly among retail travelers and high net-worth individuals. In stark contrast, the self-drive car rental segment is nascent, contributing a mere Rs 8.1 billion ($0.10 billion) in CY2023. Its lower penetration highlights limited awareness and affordability concerns. However, rising car ownership, coupled with growing millennial demand for flexibility and independence, presents potential for significant future growth to reach Rs 33.7 billion ($0.41 billion) by CY2030.
The ride-hailing segment which dominates the retail mobility market was valued at ?534.4 billion ($6.6 billion) in CY2023 and is set to grow at a CAGR of 3.2% between CY2023 and CY2030 to hit Rs 675.6 billion ($8.1 billion). While affordability and convenience fuel its popularity, regulatory hurdles, and intense competition limit explosive growth. The emergence of bike-sharing and e-rickshaws further adds to the competitive landscape. Compared to the explosive growth witnessed pre-pandemic, trends indicate saturation within this segment. India's robust economic growth and rising disposable incomes are key drivers of the B2C mobility market. Regulatory changes like simplified licensing for taxis and bike-sharing platforms could further impact growth. Technology also plays a crucial role, with mobile apps streamlining booking and payment processes. Understanding target segments is crucial. Retail car rental caters to value and reliability, while self-drive car rental targets budget-conscious travelers and urban populations. Ride-hailing services appeal to an on demand broader audience, with varying pricing models catering to price conscious customers.
Pros and strengths
Long-standing customer relationships with business synergies: The company has, through two and a half decades of business operations, established long-term relationships with customers across industries which it caters to. It provides services to its customers operating in a range of industries including information technology, business process outsourcing, global capability centres, consultancy, healthcare, e-commerce, pharmaceutical, legal and manufacturing. The company’s ability to address the transportation requirements of its customers over long periods, its dedicated service teams, its operational excellence and processes to ensure high quality levels has enabled it to acquire new customers.
Pan-India presence with operations in 109 cities in India: As of March 31, 2024, the company’s CCR services are offered to its customers through vendors operating out of 109 cities in India. The number of Indian cities where it provided its CCR services has grown from 89 in Fiscal 2021 to 94 in Fiscal 2024. The company’s offices are strategically based out of the cities of Bengaluru, Gurugram, Mumbai, Hyderabad, New Delhi, Pune, Noida, Chennai, Kolkata, Ahmedabad, Jaipur, Coimbatore, Rohtak and Lucknow. It provides ETS in 10 cities in India. The company’s Pan-India presence enables it to service the CCR requirements of its customers across the country. It also enables the company to accelerate its expansion in cities where it has a presence in case the demand from its customers arises.
Established brand built over years through operational excellence: Over the two and half decades of the company’s operations, it has established a brand presence in India. Its vehicles are equipped with best-in-class amenities and are driven by professionally trained and verified chauffeurs. Its dedicated account managers which provide the convenience of a single point of contact for all the mobility related needs of its corporate customers, 24x7 manned customer care, high standards of safety and hygiene, well maintained fleet quality check processes and seamless technology integrations have contributed towards building its brand in the chauffeur driven mobility provider segment. It also undertakes GPS tracking to manage the entire cycle of logistics and to ensure that operational efficiency is never compromised. The quality of service provided has resulted in a brand presence with minimal spends on advertising.
Comprehensive technology ecosystem enabling operational superiority: The company is focused on ensuring seamless integrations across front end applications and back-end systems. Its focus on proprietary technology has enabled the company to better manage its service offerings and improve operating efficiencies by integrating its service functions and ensuring accuracy, reliability and swiftness in its operations. Its outsourced technology team follows a structured process towards innovation and solutions to address customer concerns and drive service which has enabled the company to develop a large customer base, strengthen customer relationships and improve brand recognition.
Risks and concerns
Significant part of revenue comes from few customers: The company provides its services to customers operating in a range of industries including information technology, business process outsourcing, consultancy, healthcare, e-commerce and manufacturing. The company’s top ten customers contribute 32.84%, 35.66% and 34.60% of its total sales for the financial year ended on March 31, 2024, 2023 and 2022, respectively. The company expects that it will continue to be reliant on its major customers for the foreseeable future. Accordingly, any failure to retain these customers and/or negotiate and execute contracts with such customers on terms that are commercially viable, could adversely affect its business, financial condition and results of operations. In addition, any defaults or delays in payments by a major customer or insolvency or financial distress of any major customer may have an adverse effect on business, financial condition and results of operations. Its reliance on a select group of customers may also constrain its ability to negotiate its arrangements, which may have an impact on its profit margins and financial performance.
Maximum revenue comes from customers in major cities in India: The company runs its operations Pan India with presence in 109 cities in India. However, a significant percentage of its revenue is contributed by major cities in India. The company experiences greater competition in major cities in India than it does in other markets in which it operates. As a result, the company’s geographic concentration, its business and financial results are susceptible to economic, social, weather, and regulatory conditions or other circumstances in each of these cities. Any deterioration of macroeconomic conditions or decline in travel demand in these cities could unfavorably impact the volume of car rentals. The demand for car rentals, particularly in the corporate segment, is closely linked to the gross domestic product of the country. An increased competition, the tightening of credit markets, reduced business travel and tourism, decreased consumption, and volatile fuel prices or any other developments including natural disasters, political unrest, disruption or sustained economic downturn or regulatory obstacles in any of these Tier-I cities would adversely affect its business, financial condition, and operating results to a much greater degree than would the occurrence of such events in other areas.
Competition from unorganized sector: The organised sector holds 15% and 25% of the market share of the total ETS and CCR markets in India, respectively, whereas the unorganised sector still holds a significant share, estimated at 85% and 75% (CY2023) of ETS and CCR markets in India, respectively. The company competes with large corporations to small, local businesses, including both the organised and unorganised sectors. The corporate mobility market is fragmented with numerous small, localized players, leading to inconsistencies in service quality, scalability challenges, and limited bargaining power with corporate clients. Further, it faces competition from other mobility solutions like public transportation, ride-hailing, self-drive car rental etc. The company’s ability to compete effectively is primarily dependent on ensuring consistent service quality and timely services at competitive prices, availability of specific vehicles that comprehensively meet a variety of customers’ needs, thereby strengthening its brand over the years. If the percentage of the unorganised sector in the ETS and/or CCR sector further increases, its business operations may be affected adversely due to the lack of customers.
The company had high attrition rates in the past: As on March 31, 2024, the company had 891 employees. The continued growth of its business also depends in part on its ability to attract, hire, train and retain skilled personnel. As it seeks to expand its business and network, it requires experienced and skilled employees with relevant knowledge on the markets in which it operates. The rate of attrition in FY24, FY23 and FY22 was 28.26%, 28.28% and 20.79% respectively. The company cannot assure that it will be able to recruit and retain qualified and skilled personnel or find adequate replacement in a timely manner, or at all. Failure to train and motivate its employees properly may result in an increase in employee attrition rates, require additional hiring, erode the quality of customer service, divert management resources and impose significant costs on it, thereby adversely affecting its business, financial condition, results of operations, and cash flows.
Outlook
ECOS (India) Mobility & Hospitality is a chauffeur driven car rental service provider in India. The company's primary business is to provide chauffeured car rentals (CCR) and employee transportation services (ETS). The company has been offering these services to corporate clients, including Fortune 500 companies in India. As of March 31, 2024, the company had a presence throughout India, operating in 109 cities using its own vehicles and vendors. It was spread across 21 states and four union territories, showcasing its extensive reach and penetration into diverse regions across the country. The company has a fleet of over 12,000 cars, including economy, luxury, and mini vans, as well as specialty vehicles such as luggage vans, limousines, vintage cars, and accessible transportation for people with disabilities. On the concern side, the company derives a significant part of its revenue from some customers, and it does not have long term contracts with all of these customers. If one or more of such customers choose not to utilise its services or to terminate its contracts or agreements, its business, cash flows, financial condition and results of operations may be adversely affected. The company generates a significant percentage of its revenue from operations from customers in major cities in India. If its operations in these major cities are negatively affected, its financial results and future prospects would be adversely impacted.
The issue has been offered in a price band of Rs 318-334 per equity share. Minimum application is to be made for 44 shares and in multiples thereon, thereafter. On performance front, total income of the company increased by 33.56% from Rs 4,254.29 million in Fiscal 2023 to Rs 5,682.05 million in Fiscal 2024 primarily due to increase in the volume of business operations of the company. The total income is bifurcated into revenue from operations and other income. Moreover, the company’s restated Profit for the year increased by 43.45% from Rs 435.91 million in Fiscal 2023 to Rs 625.31 million in Fiscal 2024. The company has strategically positioned itself through comprehensive geographical presence across India. Its management through its expansion and intensification approach, intends to expand and strengthen its footprint in key regions of India. Through identifying emerging markets and assessing the unique needs of each location, the company has expanded its presence in India. Tier-II and tier- III cities in India are evolving into vibrant trade and tech hubs, fuelled by inclusive development initiatives, infrastructure funding, MSME growth, digital penetration, and poverty reduction schemes. Going forward, the company intends to tap into this expanding market by increasing its revenue from existing customers and by acquiring new customers by harnessing its position in the market, its competitive pricing, its quality services and its technological capabilities.
