Yatra’s Cash Registers May Be Ringing Two Years From Now  

Online travel portal Yatra Online is expected to turn profitable in the next two years, according to its filing with the United States Securities Exchange Commission. The revenue is projected to rise to Rs 1,053 crore in the same period.

Yatra Online which listed on the Nasdaq on Tuesday, replaced Terrapin 3 Acquisition Corporation on the exchange. Terrapin was acquired by the travel portal in July this year, which resulted in the latter becoming a partially owned subsidiary of Yatra. The deal assigned an implied enterprise value in the range of $294.3-358.2 million (Rs 1,957-2,383 crore) to the online travel agency.

The company, which operates Yatra.com, did not have a stellar debut though, as its shares listed at $10 a piece. By the end of Tuesday’s trading session, the stock ended lower at $9.7. In contrast, its larger peer MakeMyTrip had seen its market valuation nearly double to $902.8 million following its Nasdaq debut in 2010 and closed 88.93 percent higher than its listing price of $14.

While Yatra has not posted an annual net profit since its inception in 2006. MakeMyTrip last reported a profit in financial year 2011-12.

Battle In The Sky

The acquisition and subsequent listing has allowed Yatra to raise over $92.5 million of primary capital from global investors, according to the U.S. SEC filing. The cash infusion is critical for Yatra, and comes at time when MakeMyTrip has acquired Naspers-backed Ibibo Group’s travel business in an all-stock deal, creating India’s largest online travel company.

A major part of this capital will be used to strengthen mobile technology and foray into smaller cities, Dhruv Shringi, co-founder and chief executive officer of Yatra said over the phone.

“The endeavour is to go deeper into India and use capital to further reinforce the brand positioning in tier 2 and 3 markets, lead the customer acquisition from there and drive them online,” he said, adding that the demonetisation of high-value currency notes will play a big role in getting more users on board.

The company is also looking to onboard 1,500-2,000 offline agents on the platform over the next 12 months.

Shringi expects the merger of MakeMyTrip and Ibibo to reduce the intensity of competition in the online travel industry. “It will bring about some much-needed rationalisation in the discounting war that was going on between both of them, and we will see pricing sanity coming into the market which will in fact benefit the entire industry,” he said.

Mounting Losses

Shringi has a point. Yatra’s losses widened 31 percent in financial year 2015-16, thanks to pricing wars and deep discounts in an effort to attract new customers and retain existing ones.

Its net loss stood at Rs 124 crore compared to Rs 94 crore in financial year 2014-15, according to the company’s filings. Revenue rose 27.3 percent to Rs 837.9 crore in FY16 from Rs 658.1 crore in FY15.

With mounting losses, it will be interesting to see whether Yatra can meet the target. Shringi is optimistic and says the company is on track to achieve these projections.

The projections made in the filing is based on inputs from Landenburg Thalmann, an U.S.-based investment banking firm, which had been appointed by Terrapin to evaluate its acquirer, Yatra Online.