The ₹775 crore initial public offering (IPO) of Yatra Online opened for bidding today, September 15 and will close on September 20. The online travel service firm has decided a price band in the range of ₹135-142 per share for the issue.
Issue size: Yatra Online IPO comprises a fresh issuance of 4.23 crore shares aggregating up to ₹602 crore and an offer for sale (OFS) of up to 1.22 crore shares by a promoter and existing investor worth ₹173 crore. Under the OFS, promoter THCL Travel Holding will sell 1.17 crore shares and investor Pandara Trust will offload 4.31 lakh units.
Objective: The company intends to use the net proceeds from the offer to fund strategic investments, acquisitions, and inorganic expansion, as well as general corporate purposes, investments in customer acquisition and retention, technology, and other organic growth activities.
Subscription: The issue has received a weak response from investors. At 12:02 pm on its first day of bidding, the IPO was subscribed just 5 percent against its offer. It has received bids for 15.39 lakh shares against 3 crore shares on offer. The category for retail investors was bid the most, 26 percent, followed by that of non-institutional investors (NII), which was subscribed to just 1 percent. However, the qualified institutional buyers (QIBs) portion has not received any bids till now.
Grey Market Premium: Shares are commanding no premium or discount in the grey market today, indicating a listing at the IPO price of ₹142 itself.
However, it is important to note that grey market premiums are just an indicator of how the company's shares are stacked up in the unlisted market and are subject to change rapidly.
Reservation: About 75 percent of the offer is set aside for qualified institutional buyers, 15 percent reserved for non-institutional investors and 10 percent for retail investors.
Lot size: Investors have been invited to participate with a minimum bid of 105 equity shares, with increments in multiples of 105 equity shares. Hence, one lot will cost the investors ₹14,910.
Anchor investors: A day before its IPO, Yatra Online mopped up ₹348.75 crore by allocation of 2,45,59,860 equity shares at a price of ₹142 per share to 33 anchor investors including Morgan Stanley, Goldman Sachs, Societe Generale, BNP Paribas Arbitrage, Elara India Opportunities Fund, Whiteoak Capital, Quantum-State Investment Fund and various domestic mutual funds and insurance firms.
About the firm: Incorporated in 2005, Yatra Online is India’s leading corporate travel services provider in terms of the number of corporate clients and the third largest online travel company in India. It is a one-stop destination for travel information, pricing, bookings, and more. The company offers a wide range of services, including domestic and international air ticketing, bus and rail ticketing, cab bookings, hotel reservations, and ancillary services.
Furthermore, the company has the most significant hotel and accommodation tie-ups amongst key domestic OTA players of over 21,05,600 as of March 31, 2023. Yatra Online is also India’s leading corporate travel service provider with 813 large corporate customers, over 49,800 registered SME customers, and the third largest consumer online travel company (OTC) in the country in gross booking revenue for FY23. Yatra Online has over 94,000 hotels and homestays contracted in approximately 1,400 cities across India as well as more than 2 million hotels around the world. The company is India's largest platform for domestic hotels.
Peers: Easy Trip Planners is the only listed peer of Yatra with a P/E ratio of 56.53.
Financials: For the year ended March 2023, the company clocked revenue growth of 81 percent to ₹397 crore versus ₹198 in the year-ago period. Meanwhile, its profit came in at ₹7.6 crore as against a loss of ₹30.7 crore a year ago.
Book-running managers: SBI Capital Markets Ltd, DAM Capital Advisors Ltd, and IIFL Securities Ltd are the book-running lead managers to the offer. Link Intime India Private Ltd is the offer's registrar.
Important dates: The finalisation of the basis of allotment will be done on September 25, and the initiation of refunds will be on September 26. The company's shares are proposed to be listed on both BSE and NSE, with September 29 as the tentative date of listing.
Most brokerages are bullish on the stock given the scope for business improvement, industry tailwinds, brand name, and expansion of the EBITDA margin. Let's see what different brokerages have to say:
Anand Rathi: Subscribe
At an upper band, the company is valued at a P/E of 219x while on market- cap/sales it is valued at 5.8x post issue of equity shares, compared to its peer (Easy trip planners – 15.7x) on an FY23 basis. Therefore, we believe that for Yatra there is a scope for business improvement on the back of industry tailwinds, brand recall, and business scalability, resulting in the expansion of the EBITDA margin from here on. Thus, we recommend a “SUBSCRIBE – long term” rating to the IPO.
StoxBox by BP Equities: Subscribe
Being one of the key players, Yatra Online is well-positioned to capture a significant share of growth in the tourism industry in India, owing to its longstanding relationship with both B2B and B2C customers. This enables the company to target India's most frequent and high-spending travelers and educated urban consumers.
With the growth in the tourism industry, we expect the online travel market share (OTA) to increase faster than captive players, improving the company's profitability. With the company posting profits in FY23 and strong revenue growth in the past, we remain positive on the company from a medium to long-term perspective. We, therefore, recommend an SUBSCRIBE rating for the issue.
Ventura Securities: Subscribe
Yatra is leveraging its existing network of corporate clients to potentially fuel its B2C business growth. This involves enticing them with loyalty programs, eCash incentives, and enhancing product features to encourage personal travel usage. It is successfully entering the freight industry by capitalising on its existing capabilities, securing a valuable first-mover advantage.
It is focusing on organic growth within the corporate client sector by bolstering backend systems and integration technology. This strategic move aims to expand profit margins and capture a larger share of existing clients' spending. It is pursuing inorganic growth through acquisitions, specifically targeting client acquisition and expanding into Tier II & III cities. Hence, we recommend a 'subscribe' rating to the issue.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie. We advise investors to check with certified experts before taking any investment decisions.