EbixCash IPO: Worth applying?

With over 6,50,000 retail outlets across India, 10,431 dedicated employees and 196 offices in the Asia Pacific region, EbixCash has built a robust presence. Their extensive portfolio is easily accessible- be it digitally or through a wide network spanning 4,000 cities and 75,000 villages. 

If you're a keen observer, it's likely that you spotted their logo prominently displayed on the front of the Punjab Kings' jersey during the IPL. Notably, they also served as the primary sponsor for Sunrisers Hyderabad.

Recently approved by SEBI, EbixCash is set to raise ₹6,000 crore through an IPO, marking a significant financial milestone. In the tech realm of B2C, B2B, and financial technology, EbixCash is not just a player but a game-changer. 

As we continue, let's learn more about the company in detail.

About EbixCash 

Founded in 2002, EbixCash Limited is all about digital products and services. They're based in Noida and offer a bunch of cool stuff not only in India but also in 75+ other places around the world.

The company’s main focus lies in catering to the B2C, B2B, and financial technology sectors through a comprehensive integrated business model. (Hang tight for more deets in the next part! 😌)

Now, here's the interesting part: they call it a "phygital" strategy. What's that, you ask? Well, it's a mix of physical and digital awesomeness. 

They've got these real-world agent spots all over the place, especially in India and Southeast Asia. But wait, there's more! They've also got this slick online platform for everything they offer.

Why does this matter? Because it makes EbixCash one of India's big shots in the financial world. More like the Avengers, but for money matters.

Hold on to your chai; they're not just talking; they're making it happen! They've actually got the numbers to prove it. As of December 31, 2021, EbixCash has a massive network and a combo of in-person and online services that's a tough act to follow.

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Now, let me walk you through the company's business model.

EbixCash Business Model

The company's business is structured into four main segments- check out the image below 👇

Now, let's explore each of them.

EbixCash Financial Technologies

EbixCash Financial Technologies is a dynamic division offering on-demand technology services in key sectors like travel, lending, wealth and asset management, insurance, bus exchanges, and BPO.

• Wealth, Asset, and Lending Management Technology: EbixCash provides a comprehensive suite of services, including cloud-based solutions like Moneyware and InvestmentPro. 
  
  An outstanding example is MoneyWare, an integrated wealth management platform that streamlines the entire business cycle for wealth managers. It covers everything from client management and financial advisory to portfolio management, compliance, client reporting, and accounting.
  
  Serving clients in 60 countries, EbixCash Technology is a backend powerhouse with notable clients like SBI, Axis Securities, BDO, Standard Chartered, ICICI Bank, Northern Trust, Emirates Banks, and Societe Generale.
   
• Bus Exchange Technology: EbixCash is a force in financial technology for bus ticketing across India. They manage Information Technology Management Systems (ITMS) in over 1,50,000 buses across 18 Indian States, handling about $1.7 billion in annual transactions (Pre-COVID 19). Using the average exchange rate of 1$ to ₹73.9, this figure would be approximately ₹12,563 crore. 
  
  Their hosting functions extend to 25% of public sector banks in India.
   
• Travel Technology: EbixCash's travel technology group provides advanced backend corporate travel solutions to various providers in India and beyond. It's worth noting that this is separate from EbixCash's travel exchange businesses.

Payment solutions

Ever tried the EbixCash co-branded Prepaid Card? It's like your personal payment guru, teaming up with Visa, MasterCard, and RuPay. Partnering with banks like NSDL Payments Bank Limited and YES Bank makes payments a breeze.

EbixCash is all over the place, with 18 international airports and 12 seaports, as well as 8,728 corporate clients, hotels, duty-free shopping stores, temples, and educational institutes. (Handling over $4.5 billion in annual GMV (pre-COVID-19)).

Shifting gears to remittances, they're the big players in India, rocking $7.02 billion in annual business (pre-COVID-19). That's like 70% of India's cash-to-cash scene. And guess what? They play ball with the big international players- Western Union, MoneyGram, and Ria.

Travel

EbixCash is doing its thing as a travel exchange in Southeast Asia. They've got 801 employees, a huge agent network, 19 branches, and a bunch of corporate clients, handling around ₹17,500 crore in transactions before COVID-19.

• B2B Travel: They've got a chunky agent network in nine countries, selling travel stuff on VIA.com. Agents are scattered around in places like India, the Philippines, Indonesia, Singapore, UAE, and Oman.
   
• Corporate Travel: Companies across nine countries are using EbixCash's VIA.com for their corporate travel needs- airlines, buses, trains, cabs, hotels, event travel, and holidays.
   
• B2C Travel: For regular folks, EbixCash Travels offers services through various platforms in different countries.
   
• Luxury and MICE Travel: EbixCash Travels handles high-end holidays and event management.

BPO services and Start-up initiatives

EbixCash Global Services Pvt. Ltd. dives into various BPO services across India, handling customer relations, call centres, and even on-the-ground delivery. The company has also ventured into HR support and digital transformation services.

Taking a step into startups, EbixCash has backed tech ventures like Routier, AHA Taxis, and Ebix SmartClass. This move strategically places them in the realms of e-learning, telemedicine, and trucking logistics. Notably, their "Ask a doctor" initiative is a go-to for reliable healthcare information.

When it comes to education, EbixCash's SmartClass E-learning initiative boasts over 70,000 content-packed classrooms, catering to national and state curriculums in multiple languages.

In logistics, Routier plays a key role in B2B trucking, packing, moving, and warehousing, offering end-to-end solutions for both domestic and international cargo.

Now, zooming into their Cabs service, EbixCash covers intra/inter-city travel across more than 4,000 cities and over 20,000 routes. This service caters to both everyday consumers and corporate clients, providing a well-rounded transportation solution.

Having absorbed all this information, a renowned saying echoes in my thoughts- "Jack of all trades but Master of none." What's your take on this for the company? Drop your thoughts in the comments below.

Industry Overview

Let's zoom into the industry this company plays in.

This company operates in a booming Indian market. Thanks to smartphones and the internet, e-commerce and online payments are on the rise. The digital payments landscape is filled with fintech companies diving into various financial segments. The spending on software and services by financial providers is low, suggesting room for growth.

The Indian travel industry is also flourishing, with a 4-6% growth expected between 2020 and 2025. More people are spending on leisure travel, driving an 8-10% growth in the Indian Online Ticketing Market during the same period.

For companies in this market, there's massive growth potential across payment solutions, financial services, travel solutions, and technology offerings. 

Financial Performance

Now, let's break down the company's three financial statements in a straightforward way. Starting with the Profit and Loss Statement 👇

Looking at the data from 2017 to 2021, the company's net sales had a bit of a "chakravyuh" experience. 

It started at ₹343.99 crores in 2017, took a dip to ₹177.63 crore in 2018, bounced back to ₹301.55 crore in 2019, peaked at ₹347.01 crore in 2020, and then settled down to ₹294.15 crore in 2021.

Now, let's talk about profits. The net profit was robust at ₹204.81 crore in 2017, took a dip to ₹40.78 crore in 2018, and then showed a bit of recovery, hovering around ₹154.43 crore in 2021.

There were ups and downs in net sales, while net profit saw a dip in 2018 but showed signs of improvement in 2021.

Up next, the Balance Sheet 👇

Total reserves, which stood at ₹1,020.29 crore in 2017, have surged to ₹2,285.14 crore by 2021, reflecting a robust growth trajectory.

Liabilities have witnessed a notable increase, soaring from ₹791.18 crore in 2017 to ₹2,373.81 crore in 2021. This sharp increase in financial obligations suggests an expanding financial commitment for the company but may also raise concerns about the company's debt burden and financial sustainability.

The total assets, representing the company's overall financial worth, have experienced a substantial leap, reaching ₹2,373.81 crore in 2021 compared to ₹791.18 crore in 2017. This could indicate aggressive expansion or acquisitions, potentially leading to increased financial risk.

Now, delving into the Cash Flow Statement would provide insights into how the company manages its cash inflows and outflows, offering a comprehensive view of its financial health. 

The trend in net cash flow for the company has been quite a rollercoaster. In 2017, it stood at a positive ₹209.90 crore, which is a good sign. However, things took a turn in 2018 with a significant drop to negative ₹342.37 crore, indicating a substantial outflow of cash.

The situation improved slightly in 2019, but still, there was a negative cash flow of ₹12.83 crore. The company managed to bounce back in 2020 with a positive net cash flow of ₹1.69 crore, but it's not a massive leap.

By 2021, the positive trend continued, reaching ₹3.99 crore. While there's improvement, the journey reflects a mix of financial ups and downs, raising questions about the company's cash management and stability.

IPO Details are yet to be finalised.

Usage of Funds

The company plans to issue equity shares totalling ₹6,000 crore, including a rights issue of up to ₹1,200 crore. Leading the issue are book-running managers Motilal Oswal Investment Advisors, Equirus Capital, ICICI Securities, SBI Capital Markets, and Yes Securities.

The raised funds will be used for various purposes:

1. Meeting working capital needs of subsidiaries Ebix Travels Private Limited and EbixCash World Money Limited, amounting to ₹1,035 crore.
2. Allocating ₹2,747.56 crore for the acquisition of outstanding convertible debentures from its subsidiaries.
3. Funding strategic acquisitions and investments.

Strengths of EbixCash along with the Potential Challenges

Let's look at the strengths of the company.

• Excellence in Execution: Successfully integrating acquired business entities, ensuring optimisation in each segment for enhanced efficiency and productivity.
  
  Potential Pitfall: Focusing extensively on optimisation may lead to overlooking innovation, hindering adaptability in a dynamic market.
   
• Expanding Reach: Integrated value chain facilitating expansion into new overseas markets.
  
  Potential Pitfall: Relying heavily on physical retail branches may pose a hurdle in swiftly adapting to the digital-first market trends.
   
• Customer Centricity: Deeply embedded "customer-first orientation" and commitment to being the preferred partner.
  
  Potential Pitfall: Overemphasis on existing customer satisfaction may divert focus from attracting new customers and exploring untapped markets.
   
• Growth-Focused Agenda: A scalable and diversified model providing access to sustainable growth.
  
  Potential Pitfall: Depending too much on acquisitions may lead to a lack of organic innovation, potentially limiting long-term growth.

While these strengths position the company well, it's crucial to strike a balance and remain adaptable in an ever-evolving business landscape. Overcommitment to certain strategies might prove challenging in a rapidly changing market.

Shareholding Pattern of EbixCash 

Refer to the image below to observe that the entire shareholding (100%) is held by their subsidiary, Ebix Singapore Pte. Ltd.

Image taken from the company website. 

Peer Comparison

In this section, I've compared EbixCash with key players across diverse segments like payment solutions, financial services, travel solutions, and technology solutions.

The company's fiscal performance in 2021 stood out, securing the highest revenue of ₹4,150 crore, surpassing One97 Communications (₹3,190 crore) and MakeMyTrip (₹1,220 crore).

Despite the challenging year impacted by COVID-19, EbixCash's revenue growth in fiscal 2021 was remarkable, attributed to a strategic shift towards focusing more on the prepaid cards segment while other segments saw a decline.

Looking at the Compound Annual Growth Rate (CAGR) from fiscal 2019 to 2021, EbixCash ranked third at 48%, following Nearby Technologies (51%) and One Mobikwik Systems (50%).

In terms of profit after tax, EbixCash secured the second position with ₹2,420 crore and ₹2,430 crore in fiscal 2020 and 2021, respectively. IRCTC led in Fiscal 2020 at ₹530 crore, while 3i Infotech claimed the top spot in fiscal 2021 at ₹460 crore, driven by exceptional income earned during the year.

Among the peer group, EbixCash clinched the top spot in terms of EBITDA with ₹443 crore in fiscal 2021.

The Bottom Line

2021 threw a curveball at EbixCash with the whole travel and tourism slowdown, but guess what? They didn't just weather the storm; they danced through it.

Now, let's fast-forward to a post-lockdown world. EbixCash emerges not just as a player but as a rockstar, decked out in boosted assets and a hefty net worth.

As the IPO spotlight beams down, EbixCash is not just showing up; it's strutting its stuff.

*Disclaimer: The IPO and companies discussed above aren't a recommendation from Insider by Finology and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making investment decisions.