Why this NASDAQ-listed tech firm is doing ghar wapasi with India IPO

Conventional wisdom would dictate that a technology company, especially one in the field of internet-related business, would like to be featured on the Times Square billboard of the NASDAQ, the preeminent stock exchange for new-age businesses going public in the US.

But these days, the billboard is not as precious a commodity as it used to be. The iconic billboard is often seen flashing news of small to mid-sized venture capital funding news of Indian startups. It is a good marketing ploy, as these firms would at some point still love to be listed on the NASDAQ.

In that context, Yatra.com filing for an initial public offering (IPO) of its Indian unit on the local bourses seems intriguing.

The online travel agency (OTA) had listed on the NASDAQ after a reverse merger with US-based special purpose acquisition company (SPAC) Terrapin 3 Acquisition Corp, which was already listed on the NASDAQ, paving the way for a back-door listing in the US.

At that time, Yatra become the third Indian Internet company to be listed on the NASDAQ and only the fourth Indian company overall to do so. Its peer MakeMyTrip had gone public on the NASDAQ in 2010 through a regular IPO. As a part of this process, Yatra had raised more than $92.5 million of primary capital from global investors.

The listing, which was completed in December 2016, hasn’t gone down as expected. The firm, Yatra Online, Inc, which was arguably the second most prominent name in the OTA business behind MakeMyTrip, saw its shares sink by a fifth soon after but it did show some spark to go up 15-20% by September-October 2017.

Then came the winter!

The share price and thereby the fortunes of the company were hit by a blizzard. Yatra’s share price has lost over 80% of the value since its debut on the NASDAQ. It is currently valued at just around $100 million.

For perspective, EaseMyTrip, which was founded two years after Yatra and is listed on the Indian bourses, commands a market value of around $1.15 billion. Market leader MakeMyTrip is valued at $2.7 billion on the NASDAQ.

To be sure, the OTA business has seen heavy consolidation. Travelguru was acquired by Yatra, Goibibo was snapped up by MakeMyTrip, Cleartrip was bought by Flipkart, and Via.com was acquired by Ebix.

US-based Ebix had also inked an agreement in 2019 to buy Yatra at an enterprise value of $338 million. However, this deal was scrapped and the two sides have been locked in a court battle. Earlier this month, Ebix, an international supplier of on-demand software and e-commerce services to the insurance, financial, e-governance and healthcare industries, said that the Supreme Court of Delaware had upheld the ruling of the Delaware Chancery Court that had ruled against Yatra.

The original ruling, a motion to dismiss, was issued in August 2021 on the suit filed by Yatra Online in June 2020. Yatra had appealed against the 2021 ruling and urged the Supreme Court of the state of Delaware for a reversal of the ruling, which it has now lost. The failed deal with Ebix is one of the several mishaps for Yatra.

If this ongoing case was not enough trouble, the pandemic-imposed lockdowns dealt another blow to Yatra.

So, where does Yatra go from here? It is probably making a last-ditched effort to revive its business. It already counts the Reliance group, which has bought several sinking ships in the past using its mountain of cash, as an indirect minority shareholder.

Why India IPO

Yatra Online says it sees compelling benefits of an India IPO that provides it with an option to raise capital at potentially higher valuation while seeking to minimize dilutive impact for reduced balance sheet risk and improved liquidity.

An India listing will also give access to domestic Indian institutional and retail investors, including large strategic partners, currently excluded from investing in Yatra Online’s listing in the US due to regulatory constraints; opportunity to create shareholder base within Indian capital markets and increase equity analyst coverage and an opportunity for scarcity premium in India given limited number of listed Indian tech stocks, the company said.

The firm is aiming to see through the IPO by this autumn. It said the issue will reduce its cost of capital, strengthen balance sheet and fund investment. It would also provide money for potential equity-funded acquisitions in India, and invest in technology and corporate infrastructure, particularly in freight business.

While it added that Yatra Online is currently adequately capitalized to fund operations, the IPO in India will likely increase interest in Yatra Online and strengthen the company’s brand. It expects 4-5 additional research analysts initiating coverage on the stock and will provide an opportunity to leverage business media interest to improve B2C business.

Interestingly, it has filed for an IPO just weeks after Ebix, another NASDAQ-listed firm, filed for a public float of EbixCash to raise Rs 6,000 crore in India.

Local joyride

Yatra Online’s Indian unit is looking to raise $100 million in the local IPO, in addition to an offer for sale by its Cyprus-based holding company and a venture capital investor.

The Indian business, which constitutes bulk of its operations, posted revenue of Rs 125 crore for the year ended March 31, 2021. This was higher than what EaseMyTrip logged for FY21 (Rs 106.7 crore). However, EaseMyTrip is a profit-spewing venture compared to the loss-making Yatra.

Things have turned for the two in FY22 though. In the first half of the financial year ended September 30, Yatra posted revenue of around Rs 75 crore, just half of EaseMyTrip.

If market sources are anything to go by, Yatra is eyeing a post-issue market valuation of around Rs 4,000 crore ($530 million). This would be under half of EaseMyTrip, in line with its revenue gap and probably factoring in the loss-making nature of the company.

On the flip side, it would have to convince the market that it has better profit visibility compared to the other internet startups that went public recently, only to sink as concerns about their profit-making ability scared investors.

It would be hoping to leverage the surge in travel bookings as receding concerns over a milder version of coronavirus has led to a sharp uptick in holiday activities by the local population. Coming right ahead of the peak summer holiday season, Yatra should be able to showcase a good surge in business as it later files its documents for the proposed issue later this year.

In either case, a successful listing at home would help revive the business for the firm. At the same time, this could be its last ticket to survive and not meet the fate of other smaller peers Cleartrip and Via, which were sold for around $40-80 million each.