News flash: Online Travel agency (OTA) Ixigo finally booked a confirmed ticket on its IPO as it released its price band (₹88-93) and is going live on Monday, June 10th. Ixigo joins the host of other players in the industry who are already listed like MakeMyTrip, Yatra and EaseMyTrip.
For the unintiated: Ixigo is an online platform that allows users to book train/bus/air tickets and provides other ancillary services. Founded in 2007 in Gurgaon, Haryana by Rajnish Kumar and Aloke Bajpai, distinguished alumni of IIT Kanpur, Ixigo has since emerged as a premier online travel hub in India.
The company took 12 years to reach INR 100 Crore topline and then only another 5 years to grow 5x times more to cross INR 500 Cr in FY 23. In the 9 months period ending Dec'23 the company reported topline of INR 491Cr and a net profit of INR 66Cr.
But is it worth your money? Let's break it down:
2nd IPO run
Ixigo cancelled its 1st ticket to IPO back in 2021, possibly due to weak market sentiments. But so much has changed for the company since then:
Two peers- Confirmtkt (used for train ticket bookings) and Abhibus (used for bus ticket bookings) were acquired
Revenue has grown by almost 5 times
Profit has increased 12x
EBITDA margins have improved from 4.5% to 7%
No external funds raised
Funds being raised through IPO:
Fresh Issue: INR 120Cr (against INR 750Cr proposed in 2021 IPO attempt)
Offer for Sale: INR 620Cr (against INR 850Cr proposed in 2021 IPO attempt)
Interestingly, the OFS component was not released until June 5th, just 5 days before the IPO opens. What's eye popping though is that the fresh issue element has been reduced by more than 6 times from the last IPO attempt. This indicates that this IPO majorly serves as an exit route for existing investors. INR 120 Crore of fresh issue barely adds to the company's capital given that its 9 months of net profit in FY 24 was INR 66 Crore. It is unlikely to fuel any substantial growth initiatives.
Competitive moat
While competitors like EaseMyTrip, Yatra, and MakeMyTrip concentrate mainly on flights and hotels, Ixigo has capitalised on the online railway ticket booking space and boasts a jaw dropping 52.4% market share in the segment. What's also remarkable to note is that a whopping 80% of all railway tickets in India are booked through online platforms today (Whereas online penetration is at 70% for flight bookings and 32% for hotel bookings).
So to put it in simple terms, for every 100 railway tickets booked, roughly 80 of them are booked online, and of them, 42 are booked through Ixigo group platforms.
With a low gross margin of 32% in the railway ticketing space, the game plan is to double down on the volume.
Multi-app strategy
While Ixigo has acquired Confirmtkt and Abhibus, it continues to maintain separate applications for all. It even has separate apps for its rail and flights & hotels bookings. The DRHP recognizes the efficacy of its multi-app strategy in catering to diverse traveler segments, from sophisticated Tier 1 travelers to emerging Tier 2 and smaller market segments. Confirmtkt for example specifically caters to non-Tier I cities while Ixigo rail app specifically caters to Tier I cities.
Betting big on the Next Billion Internet Users (NBUs)
NBUs comprises of non-Tier 1, new-to-internet, and low to lower-middle-class consumers. As of FY23, NBUs are estimated to represent approximately 90% of the train and bus travel segment and between 50% - 55% of the flights and hotels segment, accounting for over 60%-65% of the overall travel market in 2023. Ixigo's DRHP makes repeated mention of the company's focus on this consumer segment.
The bus ticketing game plan
Currently the bus ticketing space is thoroughly unorganized with a meagre 19% of all bus tickets being booked online. However, this penetration is expected to increase to 28% in the next 4 years. Combining this with record high capex ($29Bn for FY25) by GoI on transforming road infrastructure and extremely high margins on sale of bus tickets (@60% as per Ixigo's financials), the bus ticketing space is a hot spot for online players to capture. Ixigo's Abhibus is already showing promise in this space as revenue has zoomed by 4.5x to INR 97.5Cr (for 9 months ending Dec'23) in just 3 years since acquisition.
Competitive analysis
We've compared some key metrices of Ixigo against its listed peers in the OTA industry.
Revenue
Particulars | Ixigo | Yatra | MMT* | EMT** | Comments |
Consolidated Revenue (FY23) (in ₹) | 501Cr | 428Cr | 6,525Cr | 482Cr | MMT is the undeniable leader of the OTA industry enjoying the 1st mover advantage. Rest of the 3 players are functioning in a similar scale.
Fun fact: MMT was once an investor in Ixigo. The company exited in 2021 and booked 8X returns. |
3 Years Revenue CAGR | 50% | 57% | 5% | 62% | Because of its high dependency on revenue from hotel bookings, MMT's 3 years CAGR looks meagre owing to Covid-19 induced setbacks. EMT on the other hand has made notable strides in the air ticketing space in the last 3 years. |
Revenue split: |
|
|
|
| |
Air | 37% | 47% | 25% | 99.97% | |
Bus | 16% | - | 13% | - | |
Hotel | - | 38% | 57% | 0.03% | |
Rail | 45% | - | - | - |
*MMT- MakeMyTrip
**EMT- EaseMyTrip
Market Share
Particulars | Ixigo | Yatra | MMT | EMT | Comments |
Air | 5% | 9% | 57% | 13% |
|
Bus | 12.5% | - | 75% | - | MMT's 75% share in the bus ticketing segment is through RedBus which was part of Ibibo group at the time of its merger with MMT in 2016. |
Hotel | ~0 | 3.6% | >50% | ~0 | MMT is a clear market dominator in the hotel booking space. |
Rail | 52.4% | - | - | - | There is no near competitor of Ixigo in the rail ticketing space, other than govt's own platform IRCTC. |
Overall | 7% | 5% | 65% | 6% | MMT dominates more than 50% market share in 3 out of 4 segments. The company has always eyed for absolute market leadership. Goibibo which is another leading OTA player in India had merged with MMT back in 2016. |
Others
Particulars | Ixigo | Yatra | MMT | EMT | Comments |
Net Margin | 13% | -7.7% | 7% | 17.5% | --MMT broke even for the 1st time in FY23. It appears that economies of scale has begun to kick in. The company's share prices have soared 186% in the last 1 year. --EMT has consistently booked profits in the last 3 years. --Yatra continues to struggle to find profitability. The company's shares are trading in the US bourses at a discount of almost 90% since its listing in 2016. |
ROCE | 9% | - | 5.8% (yahoo finance) | 34% (money control) | Ixigo's ROCE is much higher than that of MMT- a healthy sign, but also has significant room for improvement. EMT's ROCE of 34% is extremely commendable and much beyond industry averages. |
P/E Multiple | 50 times (derived) | - | 46 times (yahoo finance) | 62 times (money control) | Since Ixigo's major revenue comes from railway ticketing, its P/E multiple can also be compared to IRCTC's which is currently 70 times. |
Shareholding of promoters after IPO | 10.32% | 1.94% | 1.48% | 75% | Ixigo's promoter shareholding is much above those of Yatra and MakeMyTrip- a healthy sign. EMT's promoter shareholding of 75% is noteworthy. |
Concluding remarks
Ixigo's numbers and ratios (as depicted above) do not disappoint. The company has a clear competitive advantage in the rail ticketing segment, its revenue is right at par with most of the other peers while it continues to grow at a healthy pace. Its net margin, ROCE, PE multiple and Promoter shareholding are all better than majority of its peers, giving a positive signal of its financial health. Having said that, due to low barriers to entry in the OTA industry, Ixigo will continue to face stiff competition from its listed and unlisted peers. Therefore, the long term game will continue to be that of low margins and high volumes.
In a noteworthy accomplishment, Indian Railways has achieved its highest-ever capex utilization, reaching an impressive 75% during 9 months ending Dec'23. This achievement is indicative of significant strides within the industry, likely spurred by recent revamps and the introduction of the new Vande Bharat segment. Furthermore, the Govt. has announced ambitious plans to bolster railway infrastructure by laying down a staggering 7,000 kilometers of new train tracks over the next decade. With such determined initiatives in motion, the future of Indian Railways appears poised for substantial advancements, promising increased efficiency and accessibility for passengers and freight alike. This would be phenomenal for Ixigo as they already hold a dominating share in this segment.
A fifth of an average Indian's discretionary spending is directed towards expenditure in travel and tourism. This along with the rising disposable income of Indians, the Indian online travel market, estimated at ₹1,519Bn in the FY23 is projected to reach ₹2,491Bn by FY26, growing at a remarkable 17.9% CAGR during the period.
With the projected proliferation of smartphone users, expected to exceed 1.55 billion by 2040, Ixigo is uniquely positioned to leverage this burgeoning demand for mobile-centric travel solutions.
A successful IPO of Ixigo will be a significant milestone for the company, overcoming its past failed attempt to go public and thereby solidifying its position as a trailblazer in the domain of digital travel solutions.
So should you invest in Ixigo?
Well we've done our part of crunching the numbers. Now it's up to you. We're 🤐
Note:
The numbers have been extracted from F&S industry report on Indian Online Travel Agency and Ixigo's DRHP, unless otherwise mentioned.
The analysis and opinions expressed regarding Ixigo's performance and metrics are the independent conclusions of the authors and do not represent the views of the company or any affiliated individuals. While we strive for accuracy, we cannot guarantee that our analysis is exhaustive or definitive. Investors should base their investment decisions on their own judgment and due diligence. Public market investments inherently carry risks, and we urge investors to thoroughly review all related scheme documents before proceeding with any investments.
This article is a part of the May'24 edition of our Startup Newsletter. Here's the complete publication:
