Easy Trip, catchy profile; stock worth buying

EASY Trip Planners Limited is tapping the capital markets with its primary issue which opens on Monday the 8th of March and closes on Wednesday the 10th of March. The issue is an offer for sale by the promoters and would raise Rs 510 crore in a price band of Rs 186-187.

As the name suggests, the company is into the business of being an 'OTA' or online travel agency and is popularly known as Ease my trip. The company offers airline tickets and also hotel accommodation and holiday packages. The USP of this company is the option of not paying convenience fees while booking tickets. This makes its business model different as all airlines and travel portals charge this convenience fee. The difference is in the growth numbers that Easy Trip Planners has seen in its growth and the fact that the company has consistently churned out profits. Further this business is more by way of word of mouth as the company does not spend on advertising. The only spend it does do is on digital advertising on platforms and it spend 27 crore against a figure of over 40 times this amount spent by its competitor. The company is ranked second amongst OTAs in the country based on nine months revenue ending December 2020. This company is the only profit-making platform when compared with its peers like Make My Trip, Cleartrip and Yatra. In what would be a significant point and worth mentioning is that they have not taken any Private Equity Investor as a partner ever. They have not burnt cash by offering discounts to attract customers. Further they have registered a growth of 47 per cent in the nine-month period of the current year compared to the best of 20 per cent by their competitor.

The company like all platforms charges a cancellation fee if and when tickets are cancelled. This amounts to Rs 300 per ticket and sits in the books of the company for a period of two years before it gets recognised as other income. This is part and parcel of the income and is material in nature as air travel has its own set of conditions and last-minute rescheduling of travel plans is second nature to many of us.

The company has been growing its business of hotel booking and holiday packages and the same has doubled in the last year, though on a low base. The margins in this business are higher as it entails many co-related activities like air travel, hotels and local transportation and day trips thrown in.

Over 86 per cent of the gross booking volumes come from B2C which is an encouraging sign for the future prospects of the company. The area where Easy Trip Planners scores over its competitors is the significantly lower expenses incurred on manpower, customer promotion expenses and other operating expenses. The company endeavours to ensure that the customer comes first and therefore as much as 86 per cent of revenue comes from repeat customers.

The company reported revenues of Rs 181 crore for the year ended March 2020 and a net profit of Rs 33 crore. In the nine-month period ended December 2020; the revenues were Rs 81.5 crore while the net profit was Rs 30.5 crore. The company reported an EPS of Rs 3.04 for the year ended March 2020. Based on this EPS, the PE ratio is 61.51 to 61.81 times. The EPS for the nine-month period has improved significantly to Rs 2.81.

The company is in an interesting business and a sweet spot. Not having PE investors, it did not have free cash to burn which has turned out to be a blessing in disguise. Getting listed will get the company to be a more recognised name and earn it better respectability as well. This would help the company's business grow. Small size of issue and the present market craze for new issues is the one factor against the company.

(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)