The travel and tourism industry has been the hardest-hit by the COVID-19 pandemic, leaving many travel-tech startups in the country without business.
This also posed a challenge for brothers Nishant Pitti, Rikant Pitti, and Prashant Pitti, co-founders of travel startup EaseMyTrip. The company offers travel booking services such as flights, hotels, visa processing, etc.
The trio was all set for an IPO (Initial Public Offering) in 2020, but it didn’t happen. However, in the midst of every crisis lies an opportunity, which was proved by the company. Despite the pandemic, EaseMyTrip managed its stock market debut on March 8, 2021, by leveraging on its lean cost model and no convenience fee strategy.
Prashant says, “We could never raise any capital, so we had to be frugal about everything we did, and being bootstrapped also meant thinking of profitability. Until December 2020, we didn’t think of an IPO. But the same month we saw a 76 percent rise in our numbers, touching the pre-COVID levels. We have been extremely resilient because of our early bootstrapping days,” adds Prashant.
The co-founders diluted their 25 percent stake and issued shares worth Rs 510 crore, which was oversubscribed by 159 times, putting in a demand worth Rs 44,881 crore. The company was valued at Rs 2,040 crore during the IPO.
Each share was sold for Rs 187 at the IPO, and as of now the shares are trading at Rs 230, generating 23 percent profit for investors within two months.
“The company was profitable and growing. It felt like a good fit for the IPO. We have never been a marketing heavy company, and we knew that nothing speaks of trust and reliability as a public company,” explains Prashant.
In FY20, EaseMyTrip made a business of Rs 4,204 crore. Prashant says the company’s EBIDTA for FY20 was Rs 49.8 crore, and EBIDTA for nine months of FY21 was Rs 43.4 crore. Cash (or cash equivalent) increased to Rs 208 crore in December 2020 from Rs 148 crore in March 2020.
“We listed 17 percent of the share amount above the premium, and this is still consistent,” explains Prashant.
Speaking about the market and how it has created tailwinds, Sreedhar Prasad, Advisor, Analyst, ex-KPMG, and ex-Kalaari Capital, says,
“There is a very strong optimism in India, and it has never been like this before. India has become a trusted destination for foreign money. This is also another reason why there are so many unicorns in the market. There’s a lot of money in the market, which is not being invested — whether it is venture money, family office money, or personal money. And this is sector agnostic.”
He says the funds that were significantly investing in China and other markets are now looking at India. “Earlier, everyone would say tech is booming in India, but if you look at 2020, we realise everything is booming in India,” he adds.
While it is hard to imagine the growth of this magnitude for a travel company during the pandemic, Prashant explains this was a process in the making from day one of the business.
Lessons from the early days
EaseMyTrip was launched at a time when people relied heavily on travel agents to book tickets, and the process was not very transparent.
While looking online for flight tickets for their father, the Pitti brothers suddenly realised that their father was being charged more by a travel agent. The journey began from here, which eventually led them to come up with EaseMyTrip in 2008.
Initially, the Delhi-based online travel agency would ensure travel agents get the same prices and commissions as other booking sites. They also wanted to ensure the customer could get the same prices from travel agents. The team had created software that could help travel agents better their business.
“At that time, the travel agent had to pump in some money to each airline to make their bookings. They were getting a 3-4 percent commission. EaseMyTrip allowed the agents to deposit Rs 50,000 with the company and make bookings across any airline,” adds Prashant.
This allowed the team to give agents a commission of close to five percent as they were aggregating several agents. Of the seven percent commission they got from the airlines, EaseMyTrip kept one percent and passed the remaining to the agents. The travel agent was thus reducing his Capex and increasing his margins.
Bootstrapping to success
Like any first time founders, the trio was looking to raise money. An IIT alumnus, Prashant had returned from the US and reached out to a few investors, but the market and the circumstances were not favourable.
Prashant says the market already had many players like MakeMyTrip, Cleartrip, etc. “The investors saw us as one of the many players. They wouldn’t listen to us or understand that we were looking at the B2B market and not B2C,” he says.
The trio then decided to bootstrap and build the business. By 2011, the team also entered the B2C market with zero convenience fees. The team had created goodwill with the airlines and was already getting a commission, so there was no need for a convenience fee. For the B2C side, the team took a three percent commission from the airline.
Prashant explains the initial rejection helped the team keep their ear close to the ground. This even helped them sale through the pandemic year as they focussed on keeping the costs low. “Our B2C has grown by 50 percent every year from 2016, this made 87 percent of our business by FY 20,” adds Prashant.
From creating goodwill to celebrity push
The first step was to focus on customer support. When the lockdown was announced in 2020, all domestic and international travel was suspended. Customers would call to understand the status of their tickets, etc., and the call volumes had increased by 10x.
To address the rising call volumes, EaseMyTrip set up a system within a week where the customer call was integrated with WhatsApp. Customers would get a WhatsApp message when they tried calling, and the agents could then easily respond to them from their homes.
This in turn helped create strong goodwill for the company. This also helped them reduce the size of their call centre team from 200 to 90 people.
Next, they realised that with the lockdown, there were a number of people scattered across different parts of the country and world. “These were the people who needed to travel all the more,” adds Prashant. This also meant they needed the money.
The team decided to refund the amount before the airlines released the funds, and not make them wait for the refund amount that could take close to 10 days. This led to good feedback on social media platforms like Twitter, and people got talking about EaseMyTrip, explains Prashant.
The platform also created a social media campaign called ‘Saath Lakh Crore Ka Kharcha’ and invited Indian film stars to share a message that said – Indians spend Rs 7 lakh crore every year on holidays, why not spend on a company that is 100 percent Indian. These videos were widely shared on Instagram, Facebook, and Twitter.
“We contacted five to six celebrities. But when they uploaded the videos, it simply snowballed, and close to 90 celebrities shared it on their channels,” says Prashant.
During the pandemic, the team realised people were not looking for discounts and they just wanted to travel, and hence they reduced discounts. Prashant explains they gave two percent discount on their total bookings from their original three percent.
But this meant the team negotiated heavily with the airlines and offered them better payment terms, knowing that they are cashed out. This in turn translated to better commissions by about one percent. This one percent again went into the company’s EBIDTA.
“We have no salary cuts. While we reduced the number of employees from 450 to 370 in the first wave, we have made no other cuts,” says Prashant.
Shift in sentiment
Prashant adds while now the sentiment towards the travel industry is that of caution when the second wave ends, travel will be the first segment to see growth.
Adding to this, Sreedhar says, “Globally, some of the companies are finding it difficult to raise money in the travel sector. But at the same time, if there is one sector that will see growth once the lockdown eases, it is the travel segment. People travel for work, leisure, and to meet extended family. All this has stopped now, but it will restart.”
Sreedhar adds, “Another important shift is that people are becoming less risk-averse. A lot of conservative people have started investing in stock markets, crypto, and angel investment. The mindset has changed and the pandemic has made people realise they are now at the biggest risk ever. India has always been a risk-averse nation, but that is changing. This shows in the kind of subscriptions and the IPOs that have happened in the past four or five months, and the growth of stockbroking platforms is a testament to that.”
In EaseMyTrip’s scenario, the team says it will see a shift and will continue to grow at the pace at which they are growing. Prashant adds,
“I think we were able to grow at the speed and pace we could and make the choices we had because we hadn’t raised investment. It helped us make our own choices.”