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En route to an IPO, Ebix puts in a bid to buy Yatra

TRAI in-flight internet

US software company Ebix has offered to acquire 100% of the outstanding stock of travel company Yatra Online. Ebix, which provides software services for financial, healthcare, and insurance companies, intends to merge Yatra with its Indian EbixCash subsidiary. Ebix’s offer (made on March 11) for Yatra’s purchase stands at $7 per share, which is a premium of 84% on Yatra’s closing share price of $3.80 on March 8. Ebix will take on Yatra’s receivables, cash and restricted cash worth at least $25 million. It has given Yatra’s board until 18th March to accept the offer after which it can withdraw the offer. Ebix has acquired other travel companies including travel aggregator Via, SaaS travel company Zillous Solutions, luxury travel companies Mercury (in Mumbai) and Leisure Corp (in Delhi). Ever since its entry in the Indian market in May 2017, Ebix has, in rapid succession, acquired at least a dozen companies across remittance, travel, forex, and education.

Why is Ebix interested in Yatra?

Number two wants to become number one: In its last financial earnings call, Ebix India said that the company is “second today in B2B/consumer/retail markets behind NASDAQ-listed Yatra today, and we are focused on being number one by the end of the year.” One way of achieving this is by acquiring Yatra. The company said on the call that “India’s travel markets are growing at the rate of 27% to 30% annually and it is important that we take a leading position in this market.”

Ebix’s India biz is headed for an IPO: Ebix is preparing the IPO for its Indian subsidiary EbixCash, a process it began in November 2018, Mint reported. The company plans to list “possibly towards the end of 2019”. The company said it intends to pursue an IPO in India “only when our annualized revenue run rate for India, on a consolidated statutory basis exceeds $450 million, with 30% plus in operating margins.” It expects the IPO to be a large public issue and said it will need several investment bankers to handle the IPO. it said.

Yatra will earn Ebix money: Ebix has clearly indicated that it sees Yatra as boosting its earnings and profits, especially given that it has built a large travel portfolio with its most recent acquisitions of travel companies in India – Mercury, Leisure Corp, and Via. The company believes that Yatra can generate an annual revenue of $150 million with a 30% operating margin within six months after acquisition: “Ebix expects that the combination of the two companies can generate between 25 to 30 cents accretion for the shareholders of the combined Ebix company.” Ebix’s offer to Yatra, it said, is based on its “firm belief that a combination of the two companies could be substantially and immediately accretive to Ebix’s EPS.”

Ebix expects the merged entity to become travel player in the insurance service industry, providing providing distribution, travel insurance, forex, MICE, Visa, and “travel technology services through our recent acquisition of Zillious – all under one roof.”

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What does EbixCash’s travel biz involve? Ebixcash’s travel related business include Forex, domestic and international remittance services. Its remittance business brings in $4.8 billion in gross transaction value per year. It currently operates in the international airports at Delhi, Mumbai, Bangalore, Hyderabad, Chennai and Kolkata.

Yatra reduced costs substantially in Q3FY19

For the quarter ended December 2018, Yatra reported a 34.4% YoY reduction in consolidated revenues and a 40.8% reduction in profit. The company shut down its physical retail storeslet go of some loss-making corporate customersoutsourced their call-center, reduced marketing costs by 83% to reach profitability.

Ebix Acquisitions

A month ago, Ebix acquired an 80% stake in Indian SaaS travel company Zillious Solutions, and brought its founders onboard. Zillious is considered a market leader for corporate travel in India since it serves 7 of the top travel management companies in India. It processes 8 million travel bookings annually.

In August last year, it acquired two luxury travel companies in India – Mumbai-based Mercury Travels and Delhi-based Leisure Corp, and consolidated them with Ebixcash. The deals involved purchase of Mercury’s corporate, leisure and adventure related travel business, Leisure Corp’s MICE business in sports and events related travel, and Via.com’s MICE events travel business. It created a new brand ‘Mercury’ to focus on luxury, events, and sports related travel. Its worth noting that Leisure managed travel services for big ticket events like the Cricket World Cup and FIFA Football World Cup in 2019.

Via.com’s acquisition helped Ebix increase its foothold in India and gain ground in South-East Asia, including in Indonesia, the Philippines, and Singapore.

Its earlier acquisitions were the money transfer business of Paul Merchants, YouFirst Money Express, Wall Street Finance in August-September 2017, and the forex business of the Centrum Group in August last year.

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