IPO Analysis: Yatra Online Ltd
IPO Rating: Avoid
About the Issue:
The company holds a prominent position within the online travel industry, offering a comprehensive range of services that include domestic and international flight bookings, hotel accommodations, homestays, vacation packages, bus ticketing, and rail ticketing. The company is gearing up to launch its Initial Public Offering (IPO) for equity shares, each having a face value of Re 1. The IPO price range is set between Rs 135 and Rs 142 per equity share, resulting in a total issue size of Rs 775 crore at the upper price band.
The IPO is scheduled to commence on September 15, 2023, and will conclude on September 20, 2023. The anticipated listing on the exchange is set for September 29, 2023. The market lot size for the IPO is 105 shares, with the option to apply for multiples of this lot. Individual retail investors have the opportunity to apply for a maximum of 13 lots, equivalent to 1,365 shares or a total investment of Rs 1,93,830 assuming the upper price band.
| IPO Details |
| IPO Opening Date |
September 15, 2023 |
| IPO Closing Date |
September 20, 2023 |
| Issue Type |
Book Built Issue IPO |
| Face Value |
Rs 1 per equity share |
| IPO Price |
Rs 135 to Rs 142 per equity share |
| Min Order Quantity |
105 Shares |
| Post Issue implied Market Cap |
Rs 2,228.21 crore |
| Listing At |
BSE, NSE |
| Issue Size |
54,577,465 shares of FV Rs 1* |
| (Aggregating up to Rs 775 Cr)* |
| Fresh Issue |
42,394,366 shares of FV Rs 1* |
| (Aggregating up to Rs 602 Cr)* |
| Offer for Sale |
12,183,099 shares of FV Rs 1* |
| (Aggregating up to Rs 173 Cr) * |
| QIB Shares Offered |
75% of the Offer |
| Retail Shares Offered |
10% of the Offer |
| NII (HNI) Shares Offered |
15% of the Offer |
| *At Upper Price Band |
|
Objects of the Issue
The company plans to allocate the net proceeds raised from the issue for the following purposes:
- Strategic investments, acquisitions and inorganic growth
- Investment in customer acquisition and retention, technology, and other organic growth initiatives
- General corporate purposes
Promoter holding
THCL Travel Holding Cyprus Ltd and Asia Consolidated DMC PTE Ltd are promoters of the company. The promoters currently hold a pre-issue shareholding stake of 98.59 per cent in the company.
About the company
The company stands as a prominent player in the online travel industry, boasting a robust network of over 1 lakh contracted hotels nationwide. With a substantial network of more than 17,000 agents spread across India, the company caters to the demands of a sizable and fragmented travel agent market, employing over 4 million employees.
Their service portfolio encompasses a wide spectrum of travel-related offerings, encompassing domestic and international air ticketing, hotel reservations, homestays, holiday packages, bus ticketing, rail ticketing, and more. Since its establishment, the company has served more than 7 million customers, facilitating their use of various all-encompassing travel services.
Both leisure and business travellers can use the company's website, mobile apps, and affiliated platforms to explore, compare prices, and make reservations for a diverse array of services tailored to their travel requirements. Yatra Online has recently unveiled a new venture, ‘Yatra Freight’, aimed at broadening its range of corporate services.
Financials
| Rs (in crore) |
FY20 |
FY21 |
FY22 |
FY23 |
| Sales |
673 |
125 |
198 |
380 |
| Operating Profit |
46 |
-23 |
-9 |
37 |
| Profit before tax (PBT) |
-66 |
-112 |
-29 |
12 |
| Net Profit |
-70 |
-119 |
-31 |
8 |
Outlook and Valuation
There's no denying that modern customers seek comprehensive one-stop solutions for all their travel requirements, which will undoubtedly serve as a significant catalyst for business growth. However, it's important to acknowledge that the company operates within a fiercely competitive industry. Additionally, given the company's strategic priorities involving acquisitions and strategic investments, substantial capital investments are required to achieve these goals. Over the past few years, the company has faced a notable challenge in the form of a high attrition rate.
Following a remarkable performance in terms of revenue and operating profit during FY20, the company experienced a downturn over the past three years and was unable to regain the same levels of success. Furthermore, the company has reported losses for the past four financial years, with the exception of a marginal profit in FY23. Consequently, the company has consistently reported negative PAT margins, with only a modest 2 per cent in FY23.
The issue is priced with a P/BV ratio of 9.44 times, calculated using its Net Asset Value (NAV) of Rs 15.04 as of March 31, 2023. At the upper price cap, it is priced at a P/BV ratio of 2.89, considering its post-IPO NAV of Rs 49.17 per share. When we compute the PE ratio for the company by considering FY23 earnings to the post-IPO fully diluted paid-up equity capital, the resulting PE ratio stands at around 290, indicating an enormously aggressive valuation. Easy Trip Planners, a listed peer of the company, currently maintains a PE ratio of 49, while the industry PE ratio hovers around 50.
Therefore, we recommend investors to avoid this investment, given its extremely high valuation and associated risks.