How EaseMyTrip defied tech sector rerating and flew into billion-dollar club

A decade ago when the Pitti brothers were trying to build EaseMyTrip, they were seen as someone trying to ride on a brand name similar to the largest player in the online travel agency (OTA) business in the country. Of course, EaseMyTrip was a minnow compared to MakeMyTrip, which had gone public on the Nasdaq no less after getting marquee venture capital backers in the past.

To be sure, it was a time when the OTA business had over half a dozen players trying to take a piece of the pie. Most of them were VC-backed startups including Yatra, Ibibo and Cleartrip as well as Via, Musafir and others.

EaseMyTrip remained under the radar as a bootstrapped venture and slowly kept building its business. As the bigger fishes fought among each other only to be gobbled up by others or face serious cash issues, EaseMyTrip emerged as the second-largest player in the business.

The company went public in the middle of the pandemic in India last year, a period when the hospitality industry was down in the dumps due to restrictions on movement of people and reticence in taking holidays.

Call it fair pricing at the time of the IPO or rewards for the perseverance, Easy Trip Planners Ltd, the company behind EaseMyTrip, has defied all odds to rise almost six-fold and is currently valued at over Rs 11,000 crore, or over $1.3 billion.

This is when most other internet related tech stocks that entered the public market last year have lost anywhere between 50-80% of their value compared to the IPO price, or at best are trading at the same level at which they sold shares to the public.

While beauty and fashion ecommerce firm Nykaa is facing a backlash for what many consider a sleight of hand, by announcing a bonus share issue to coincide with its one-year anniversary at Dalal Street and to stem a big slide in share price as the one-year share lock-in period expires, EaseMyTrip is in the process of executing its second bonus issue since listing.

The company’s investors in the IPO would be a happy lot, for sitting on oversized returns, usually reserved for venture capital investors in startups, in a relatively safe haven of a public company.

Bright Numbers

One thing the company has been maintaining zealously is its bottomline picture. The company has been profitable for years, if not ever. To be sure, it did face a period where growth was stagnant. Indeed, for three years running FY17-FY19, the company’s standalone revenue from operations was flat at around Rs 100 crore.

It was also a period of flux among its bigger peers. Yatra had just followed MakeMyTrip to get listed on Nasdaq and Via was acquired by Ebixcash. Cleartrip was also facing cash crunch and was later acquired by Walmart-controlled Flipkart, around the same time EaseMyTrip went public in early 2021.

But it has not looked back since.

At a consolidated level (the company started sharing numbers along with subsidiaries from FY19) the company’s revenues shot up 70% for the year ended March 31, 2022. This was partly due to a lower base as revenues had declined 15% the year before. But at Rs 235.37 crore, it was 45% higher than the previous high logged in FY20.

Net profit margins at 42% was over double the pre-pandemic period, bringing the real power of an asset-light technology business to the fore.

If we look at the latest quarter numbers, it shows how the company is well placed to leverage its platform for building muscles further as the pent-up demand for travelling is leading to a major boost for the hospitality sector at large.

Revenues at Rs 108.5 crore for the three months ended September 30, 2022, ahead of the year-end holiday season, has set the firm on track to almost double its topline in FY23.

The flip side

One factor that should be playing on the mind of investors is its profit margins. As employee cost has more than doubled this year, EBITDA margins and net margins have shrunk to 37% and 26%, respectively, from around 59% and 42% the last year.

The other is business split. EaseMyTrip for long has been seen more as a flight booking engine, a segment with cut throat margin pressure where the business is volume driven.

In contrast, hotels and holiday packages, a more lucrative segment with higher margins remained a preserve of the bigger peers. Indeed, EaseMyTrip almost has a negligible presence in the hotels and packages category.

The company says it does not expect this to be a downer as its industry growth projections show it is banking on faster growth in the air ticketing business. While the company expects the overall travel industry will grow 46% to Rs 4.04 trillion by FY27, it sees the hotels business pie shrinking from 27% now to 24% in four years.

It sees flights business growing at a 15% CAGR over the four-year period from now compared to 10% for hotels.

Numbers show that EaseMyTrip’s perseverance has paid off and it has had investors eating out from its hands since listing. While the juicy margins of last year did place it on a higher pedestal, as employee benefit expense chip away margins, its continued run of success would depend on how it manoeuvres the investors' expectation by growing its revenues enough to blow up the profit.