Yatra Online, Inc. (YTRA) Earnings Call Transcript & Summary

Good day, and welcome to the Yatra India IPO update call. Today's conference is being recorded. At this time, I would like to turn the conference over to Manish Hemrajani. Please go ahead.

Thank you, Serge. Good morning, everyone. Welcome to Yatra's conference call to discuss the filing of our draft well [ having ] prospectus in India earlier today. I'm pleased to be joined on the call today by Yatra's CEO and Co-Founder, Dhruv Shringi. Before we begin, I would point everyone to accompanying presentation and materials that have been made available on the Investor Relations section of our website at investors.yatra.com. The following discussion, including responses to your questions, reflects management's views as of today, March 25, 2022. We don't undertake any obligation to update or revise the information. As always, some of the statements made on today's call are forward-looking, typically preceded by words such as we expect, we believe, we anticipate or similar statements. Please refer to company's filings with the SEC for information about factors, which could cause our actual results to differ materially from these forward-looking statements. Additional information concerning these statements is contained in the Risk Factors section of the company's annual report on Form 20-F filed and updated with the SEC on March 25, 2022. Copies of this and other filings are available from the SEC and on the IR section of our website. Please note that the purpose of this call is to discuss Yatra's DRHP filing since we haven't filed our December quarter results, we will not be in a position to discuss or say. With that, let me turn the call over to Dhruv. Dhruv, please go ahead.

Thank you, Manish. Good morning, everyone, and thank you for joining us this morning. I hope that you and your families continue to stay safe. As we had shared with you back in December, we are continuing to work with bankers and lawyers within India to explore our options in India IPO. To that end, we've taken the first step in the process with the filing of the draft red herring prospectus, with the Securities and Exchange Board of India, which is the main market regulator. We believe following this close of action will greatly enhance Yatra's strategic flexibility and act as a catalyst to improve shareholder value. When we come out of this pandemic on the back of the secular growth in Indian travel, the mid-teens signing growth that we've seen during the pandemic for new customers on the corporate front and the growth of our hotel network, our digital freight platform, which is completely additive to the business, we feel we'll be in a significantly better revenue growth trajectory as we come out of the pandemic. We've already begun to see very strong signs of recovery happening over the course of the last 2 months. And we believe that April, May, June should be a very strong summer season for the travel industry. We believe the opportunity ahead for Yatra is massive, we believe the Indian internal travel industry will pick an inflection point in the coming years as we go fast-forward. And we believe corporate travel, where we are the market leaders, is already showing signs of recovery and quick acceleration. In addition, the efforts we made during the pandemic to improve operational efficiency will lead to significantly higher levels of profitability and cash flow. I want to thank our shareholders who have stood by Yatra through these trying times. I'm hopeful and honestly believe it's only a matter of time before your patience and understanding is rewarded. As we continue to execute our strategy, our Board of Directors and management team regularly considers the opportunities to enhance value for Yatra's shareholders. As part of these ongoing efforts, we are working towards an additional listing in India to support our ongoing strategy and accelerate our growth efforts. We believe potential benefits of this listing, which will support Yatra's ongoing strategy and value creation opportunities include access to an additional pool of capital, including retail and institutional investors in India who are already familiar with the Yatra's business and brand, but who are currently restricted from participating in the U.S. capital markets. Unlock additional value for U.S. shareholders, provide a liquid stock that can be used for local M&A in India, further capital to strengthen the balance sheet and additional research coverage amongst other benefits. The company has engaged leading financial advisers, including State Bank of India Capital Markets, Dan Capital and IFL in connection with its India listings. There is, however, no assurance that Yatra will proceed with the listing or that the exchanges would approve a listing application by Yatra. Our endeavor is to look at raise about $100 million in primary capital and a further 8% secondary sale by one of our subsidiaries, which would be capital that will flow back to the holding company. So that's the broad structure that we are looking at. From a timing perspective, SEBI is currently taking anywhere between 8 to 12 weeks to clear documents which are filed with it. And we are hoping that we can work with the bankers, lawyers and SEBI to expedite that entire process. So with that, let me pause for a minute and Manish, hand it back to you to see if there are any questions.

Please open it up for questions if there are any.

[Operator Instructions] Lisa Thompson, Zacks Investment Research.

Thank you for all this update. Do you have something in mind as far as acquisitions with this raise...

We've looked at acquisitions in the past. Lisa, if you've been tracking us. You'll see that we made an acquisition of Air Travel Bureau, which was in the corporate travel space a few years ago. Before that, we made another meaningful acquisition of Travelguru in the hotel space. So we've continued to look at acquisitions as we go forward. And I think, especially on the corporate channel side, there is a lot of opportunity for consolidating the market because a number of offline players who are not very tech-enabled are finding it challenging to scale up their business in this kind of new hybrid world that we live in. We've seen our technology platform get great acceptance from customers and acceleration of online adoption on the large corporate side. So on the back of that, we think there are meaningful avenues for us to look at consolidation on the corporate travel side of things and also look at that as a stepping stone. Look at -- sorry, acquisition as a stepping stone for building out further scale on our trade business.

All right. Sounds good. I'm just curious, is this filing available publicly or not...

Yes, the filing is available publicly. Yes, the red herring is publicly available. We've also filed a 20F, which talks about some of the incremental information, which is available in the red herring. The red herring typically takes anywhere between -- it's been uploaded on the SEBI website earlier this afternoon, India time, and it takes anywhere between 12 to 24 hours to be publicly available.

Okay. Good. And do you plan on reporting the December quarter between now and this deal?

Yes, we would be reporting that shortly. It's only because of the procedural and some regulatory issues involved that the reporting of the December quarter was delayed. Now that the DRHP has been filed, we will be reporting this very shortly. We'll come out with another release, which will put out the date for the December quarter, but it's going to be eminent.

Okay. Great. And while we have you on the phone, I guess India recently opened to international travel. Can you just talk a little bit about what you've seen since that happened?

Sure. So India or rather it's opening up on the 27 for international travel on a scheduled flight basis. But anyways, keeping that in line, we've seen meaningful uplift in the demand for international travel and international bookings, both on the consumer side and on the corporate side. So markets have been open, but price was still limited, but we are seeing more flight capacity being added with effect from 27th of March when we move away from the bubble agreements which have been there on a bilateral basis into the earlier kind of bilateral open skies arrangement which existed. So we'll see more capacity being deployed from 27th of March and that incremental capacity should help drive further demand in international travel.

Great. That's all my questions. Best of luck with the deal.

There are currently no further questions in the queue. [Operator Instructions].

Dhruv, I've had a couple of questions coming over e-mail. So let me just speak them out. What is your expectation on the valuation you will receive in the Indian market?

Manish, the valuation will be done through a price discovery process as is the case in any other IPO, we will go through an intensive marketing exercise with the domestic institutional investors in India and the institutional investors who are based in India. And based on that marketing exercise, this will be done, but then we will arrive at price discovery for the potential listing. But our endeavor is we need to look at a listing, which would be at a meaningful premium to the current stock price of the [ option ].

Got it. Operator, we have one more person in the queue. Can you open it up.

Vijay Singh, Fiera Capital.

I had a couple of questions. First is, is the $100 million amount that's been announced, is that a placeholder? Or how flexible is that amount? And associated with it also the 8% secondary that you're discussing, how will that work in terms of the corporate structure? And the second question is, does that not create a potential for discount and how much flexibility you have in terms of closing the discount between the potential U.S. listing and the Indian listing.

Sure. So good questions, Vijay. Let me first talk about the primary aspect of it. From a regulatory standpoint, SEBI allows you to modify the primary amount by up to 20%. So that such flexibility is there. But it will be within that range only of plus/minus 20% from a primary perspective. The 8% that we are talking about from a secondary sale, that is -- which will be done by a whole subsidiary of Yatra Online, Inc., which is Yatra Cyprus, and that money will then get dividend back to Yatra Online, Inc. The holdco can then use that cash for either other international expansion or even look at things like share buybacks, et cetera, in the U.S. So that is the objective of putting some extra flexibility in the hands of the holdco as well to look at future expansion or look at share buyback.

I see. And in terms of how -- when you're talking about the shareholder value being delivered, do you have sort of a range in mind where you would expect to intervene via buyback, let's say, it's 30% discount, 50% discount? Or this is too early for that? Because I'm just wondering the shareholder base in India, U.S. is very different.

It's way too early to look at that from a numerical perspective, right? The actual numbers will be determined by market conditions at that point in time. But the main takeaway out of this from a secondary perspective, right, is that the secondary gives the company a lot more flexibility, which it currently does not have right? So that's how I would look at it that there is an option value of that flexibility which today the company does not have. And then at the operating level, the primary amount gives it growth capital. It strengthens the balance sheet, the listed entity then provides a liquid stock in India, which can be used for further M&A.

Scott Buck, H.C. Wainwright.

Just one quick one for me. I was wondering, Dhruv, if you could speak to the Indian capital markets and what kind of activity you've been seeing? I know the U.S. market -- IPO market has been slow this year. I'm just curious if things are meaningfully more active in India.

In India, also the markets have come off a little bit from where they were. The overall index is close to about 6% to 8% down from its peak to nowhere close to the kind of decline that we've seen in the NASDAQ. Tech stocks, however, have taken a more -- have taken more of a beating compared to some of the other broader stocks which are there. But I feel Yatra as a story is very well known, very well understood in the Indian market. And also, I think where we trade today in the U.S. does not in any way reflect the true underlying value of the business. So given those circumstances, I think Yatra is a unique opportunity in the Indian context. There is also a bit more of a scarcity premium which is associated with tech stocks in India, especially travel technology stocks. So I think that's also something we could benefit from. And the other thing I would point to is you can also look at a listed peer in India, which is a company called EaseMyTrip, and that's still trading at very healthy multiples because travel is being looked at as one of the recovery stories as we come out of the pandemic.

Great. That's some good information. I appreciate the time guys.

There are currently no further questions in the queue.

Thank you, everyone, for joining us -- anything to add, otherwise and...

Okay.

Nothing further from me. Anything further from you, Dhruv.

No, I think I just want to thank everyone. And I think this is a great opportunity in front of us, and we are very excited about the prospects as they unravel over the next few months. So thank you for your support once again, and we'll stay in touch and keep you all updated.

As always, materials are available on the IR section of our website, and we are available for discussion over e-mail or call. Thank you, everyone.

This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.