What you must know about the Yatra Online IPO

Yatra Online Ltd was incorporated in the year 2005 to provide pricing data, booking availability details and transaction booking facilities on the internet. Yatra Online Ltd has been one of the oldest ecommerce platforms on the internet in terms of ticketing in India. It provides domestic and international ticketing on Indian and global carrier flights through its online booking platform. In addition, Yatra Online Ltd also provides booking for railways, cab bookings, ancillary services as well as for hotels and other facilities at one single spot. It syndicates rooms from more than 105,000 hotels located across more than 1,490 towns and cities across the length and breadth of India. In addition, it also offers access to more than 2 million hotels for global bookings. Apart from the web platform Yatra.com, the company also offers an app based software for customers as well as a SAAS application for B2B usage among corporates and other associated platforms.

The hotel properties offered by Yatra Online Ltd will be a combination of hotels and homestay facilities on a syndicated basis. It also offers freight forwarding under the banner of Yatra Freight, mainly targeted at corporate B2B customers. Considering its flexible and scalable platform, Yatra Online Ltd has B2C and B2B customers on its client roster. It broadly focuses on the educated urban customer looking at quality travel at an economical cost. These customers also tend to be frequent flyers and high spenders. Apart from the retail online customers, Yatra Online Ltd also has more than 813 corporate customers complemented by nearly 50,000 SME customers for its services. It ranks as the third largest online ticketing company in terms of revenues generated. The IPO will be lead managed by SBI Capital Markes, DAM Capital Advisors (formerly IDFC Securities) and IIFL Securities. Link Intime India Private Ltd has been appointed the registrar to the IPO.

Highlights of the IPO issue of Yatra Online Ltd

Here are some of the key highlights to the public issue of Yatra Online IPO.

• Yatra Online Ltd has a face value of ₹1 per share while the price band for the book building IPO has been set in the band of ₹135 to ₹142. The final price will be discovered within this band through the process of book building.
   
• The IPO of Yatra Online Ltd will be a combination of a fresh issue and an offer for sale (OFS). The fresh issue portion comprises the issue of 4,23,94,366 shares (4.24 crore shares approximately), which at the upper price band of ₹142 per share will translate into fresh issue size of ₹602 crore.
   
• The offer for sale (OFS) portion of the IPO comprises the issue of 1,21,83,099 shares (1.22 crore shares approximately), which at the upper price band of ₹142 per share will translate into an offer for sale (OFS) size of ₹173 crore.
   
• Out of the 121.83 crore shares put up under the OFS, the promoter (Travel Holding Cyprus Ltd) will sell 117.52 lakh shares and investor Pandara Trust will sell 4.31 lakh shares as part of the offer for sale (OFS).
   
• Therefore, the overall IPO of Yatra Online Ltd will comprise of the issue of 5,45,77,465 shares (5.46 crore shares approximately), which at the upper price band of ₹142 per share will translate into a total IPO issue size of ₹775 crore.

While the fresh issue will be capital and EPS dilutive, the offer for sale portion will only result in transfer of ownership. There will be just 2 holders offering shares under the OFS portion as mentioned above; with one being a promoter and the other being a non-promoter early shareholder investor. The proceeds of the fresh issue portion will be used strategic investments, inorganic growth and for investing in customer acquisition and customer retention.

Promoter holdings and investor quota allocation quota

The promoter holding in the company prior to the IPO stands at 98.59% and this will get diluted post the combination of fresh issue and offer for sale. As per the terms of the offer, 75% of the net offer is reserved for the qualified institutional buyers (QIBs), while only 10% of the total issue size is reserved for the retail investors. The residual 15% is kept aside for the HNI / NII investors . The stock of Yatra Online Ltd will be listed on the NSE and on the BSE. The table below captures the gist of the allocation to various categories.

Lot sizes for investing in the IPO of Yatra Online Ltd

Lot size is the minimum number of shares that the investor has to put in as part of the IPO application. The lot size only applies for the IPO and once it is listed then it can be even traded in multiples of 1 shares since it is a mainboard issue. Investors in the IPO can only invest in minimum lot size and in multiples thereof. In the case of Yatra Online Ltd, the minimum lot size is 105 shares with upper band indicative value of ₹14,910. The table below captures the minimum and maximum lots sizes applicable for different categories of investors in the IPO of Yatra Online Ltd.

It may be noted here that for the B-HNI category and for the QIB (qualified institutional buyer) category, there are no upper limits applicable.

Key dates for Yatra Online Ltd IPO and how to apply?

The issue opens for subscription on 15th September 2023 and closes for subscription on 20th September 2023 (both days inclusive). The basis of allotment will be finalized on 25th September 2023 and the refunds will be initiated on 26th September 2023. In addition, the demat credits are expected to happen on 27th September 2023 and the stock will list on 29th September 2023 on the NSE and the BSE. Yatra Online Ltd offers a very unique combination of offline and online models and has pedigree and track record on its side. It has an established and tested business model. Let us now turn to the more practical issue of how to apply for the IPO of Yatra Online Ltd.

Investors can apply either through their existing trading account or the ASBA application can be directly logged through the internet banking account. This can only be done through the authorized list of self-certified syndicate banks (SCSB). In an ASBA application, the requisite amount is only blocked at the time of application and the necessary amount is debited only on allotment. Investors can apply in the retail quote (up to ₹2 lakh per application) or in the HNI / NII quota (above ₹2 lakh). Minimum lot sizes will be known after pricing.

Financial highlights of Yatra Online Ltd

The table below captures the key financials of Yatra Online Ltd for the last 3 completed financial years.

Data Source: Company RHP filed with SEBI

There are few key takeaways from the financials of Yatra Online Ltd which can be enumerated as under

1. In the last 2 years, the revenues growth has been robust and that is in sync with the rapid growth in top line of most of the ecommerce companies. However, this is a long gestation project as is evident from the consistent losses till the previous year with profits only made in the current year. That makes it a very risky choice for the investors.
    
2. The net margins or the return on assets or even the ROE are not really relevant as the company was loss making till the previous year. For the latest year, the PAT margins and ROE are quite tepid. Hence, investors have to take a view purely based on the potential of this sector and the extent to which it can translate its footfalls into revenues and later into profits.
    
3. The company has maintained very low rate of sweating assets as is evident from the asset turnover ratio. It has consistently been below 0.50 on an average, but that is the nature of the online business where investments have to be necessarily front ended. However, the sector is still a good bet on the massive potential of online ecommerce.

While pricing of the IPO does matter here, there is not much of a valuation play that you can assess considering the losses till the previous year and one year data is too short anyways. At an industry level, these ecommerce companies are looking at the stock markets more to give an exit to early investors and because PE funding is not easily available. The traction is good on the top line but there is no clarity on when there will be traction on the bottom line. A lot will depend on how the company is able to scale and replicate profits. Investors can look at the IPO as a bet on the ecommerce story in India, although this would suit investors with long waiting period and relatively higher risk appetite.