Yatra Expects To Thrive In Mid-To-Long Run Amid Pandemic, Cancelled Merger

Gurugram and New York-headquartered online travel aggregator Yatra cancelled its ongoing merger with Ebix last week and has now reiterated its financial capacity to weather the Covid-19 storm.

Addressing an investor call on Tuesday (June 9), Yatra CEO Dhruv Shringi said that the company has adequate liquidity to weather conditions for a sustained period of time. Shringi said that the domestic travel would come by gradually and by the same time next year, he expects the firm to hit pre-Covid run rates.

Pick up in international travel would depend on macro factors like the progress on the development of a vaccine and the differing policies of each country, he said. Overall, he added that the business may be able to come to pre-Covid run rate by mid-2021 if a vaccine comes by the end of 2020.

Earlier in the week, Yatra said that it believes it has a strong financial position to support the company in the coming quarters. The company pointed out that it has a total available liquidity of $32.5 Mn as of June 4, 2020, while its monthly run-rate operating fixed cost was approximately $1.2 Mn, excluding any litigation-related expenses.

This means that the company claims to have enough runway to last for at least 26 months.  Yatra, while cancelling the merger deal, filed a plea seeking ‘substantial’ damages for Ebix’s alleged breach of deal terms. In 2019, Ebix had agreed to buy Yatra at an enterprise value of $337.8 Mn.

Yatra said that the company has put in place significant cost cuts to improve efficiency and attain profitability over the last 18 months. It claims that these efforts have helped the company to be in a strong position in the current environment.

Most of the decisions which the company made at the outset of the financial year 2020. These include outsourcing of call-centre operations and optimising marketing spend, among others. Yatra claimed that initiatives such as headcount rationalisation and reduction in customer promotions in B2C hotels further helped reduce the cost structure of the business.

As a result of these measures, the company reported a positive adjusted EBITDA of $2.9 Mn in the fourth quarter of 2019. Meanwhile, the company has started to take additional cost reduction initiatives that Yatra claims helped to save 58% in fixed cost savings in May 2020 as compared to March 2020 and 70% in comparison to March 2019.

These initiatives include reducing management salaries by 50%, variable reduction in salaries of 25-75% across verticals, freezing salary hikes, renegotiating payment terms and conditions with suppliers and landlords, revising marketing spend to align with revenue.

Founded in August 2006 by Sabina Chopra, Manish Amin and Dhruv Shringi, Yatra provides a full range of travel-related services such as domestic and international air ticketing, hotel booking, homestays, holiday packages, bus ticketing, rail ticketing, activities, attractions and ancillary services.

The company claims to have tie-ups with 70K hotels in India and nearly 800K hotels across the world. It is backed by IDG Ventures, Vertex Venture Management, Norwest Venture Partners and other investors.

According to third party research, the corporate travel market size in India is $32 Bn with just 5% online penetration and the market is highly fragmented with 60% of the corporate travel market currently being served by small/medium travel agents.

“We anticipate an accelerated shift from that side of the market to large travel management companies (TMCs) such as Yatra in the current environment. We have built scalable and robust tools for automating business travel and in this environment where travel companies across the globe are focused on cost reductions,” the company said.

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