Why Ebix Is Willing To Pay A Steep Premium For Yatra

Ebix bid $7 a share, lower than Yatra’s listing price of nearly $10 but a premium of about 85% to prevailing prices.

Attendees travel between floors during the Google I/O conference in San Francisco, California (Photographer: David Paul Morris/Bloomberg)
Attendees travel between floors during the Google I/O conference in San Francisco, California (Photographer: David Paul Morris/Bloomberg)

After a string of smaller bites of India’s internet economy, Ebix Inc wants to chomp a big one: travel portal

Ebix has invested close to $700 million in the country through EbixCash since 2017 to buy more than a dozen firms—three of them luxury travel operators, Mercury Travels, Delhi-based Leisure Corp, and It has now offered to acquire Yatra for about $336 million in what will be its largest acquisition. The Nasdaq-listed firm bid $7 a share, lower than Yatra’s listing price of nearly $10 but a premium of about 85 percent to prevailing prices.

It’s chasing the opportunity, not the value, Devendra Agarwal, chief executive of investment banking firm Dexter Capital, said. “If you look at Ebix’s acquisitions over the last two years, they are trying to build an empire in financial, healthcare, insurance and the travel verticals—both offline and online,” he said. After acquiring, according to Agarwal, losing Yatra will be an opportunity lost.

India’s internet economy has been on steroids of faster data speeds and increasing smartphone usage since Mukesh Ambani’s Reliance Jio Infocomm Ltd. unleashed a tariff war. That prompted investors to pump bigger heaps of cash. According to a Boston Consulting Group-TiE report, the market is estimated to bulk up to $250 billion by 2020, growing twice its size in four years.

Travel is among the fastest-growing categories. According to a February presentation by Yatra, the segment is poised to grow from $51 billion in 2017 to $85 billion by 2022, with the share on online platforms increasing from 39 percent to 45 percent.


If the deal with Ebix goes through, Yatra will become a challenger to No. 1 MakeMyTrip, which consolidated its domination by buying Ibibo in 2016. Travel acquisitions, Atlanta, U.S.-based Ebix said, have already helped it report gross sales of about $2.5 billion. With Yatra, it wants to cross-sell forex, travel insurance and visa services.

“The synergies are perfect,” Robin Raina, chief executive officer of Ebix Inc, told BloombergQuint. Yatra’s acquisition will help nearly double the gross sales to $4.5 billion. “It will make us the number one player in the corporates travel business.”

Yatra is yet to report a full-year profit but posted a $2-million profit in the three months ended December, with an operating loss of about $2.2 million, according to its filings. Ebix reported an operating income of $41.5 million, with a profit of $8.5 million for the quarter.

But travel is a small part of Ebix’s overall businesses. Of its revenue of $497.8 million in 2018, Raina said about 16-17 percent came from the travel segment.

Still, if the Yatra deal materialises, synergies after three to six months of work will be able to convert the portal into a 30-percent-operating-margin company, Raina said. EbixCash, which is eyeing an initial public officer by the end of this year, expects the Yatra deal to help it rake in $150 million quarterly revenue and $45 million operating income by then from India alone.

Corporate travel services will give the company an edge against MakeMytrip, Raina said, adding that it doesn’t want to grow at the expense of operating costs. “I’m eyeing a 30-35 percent operating margin from the business. If that means we won’t reach revenue level of MMT, that is okay.”

Still, taking on MakeMyTrip is easier said than done. MakeMyTrip, its investor presentation said, dominates the travel market with 63 percent share as of 2017. The combined share of Yatra and Cleartrip is about 26 percent.

Emailed queries to MakeMyTrip on possible competition from Ebix-Yatra combine remained unanswered.

Sanchit Vir Gogia, founder and chief executive officer at Greyhound Research, MakeMyTrip has reached a point of maturity where it offers customers a predictable experience. With Ebix’s strong financials and understanding of travel business, it will be able to mount a formidable challenge to MakeMyTrip, he said over the phone. “[But] it will take some credible evidence of offering highly competitive customer experience at the same or a lower cost.”

Even so, according Agarwal, alone doesn’t stand a chance against Makemytrip-Goibibo. If the acquisition goes through, it will not only be an excellent deal for Yatra shareholders but will also make it a formidable challenger. “How well they execute will be the key.”

Watch the full interview here: