From the outet of the pandemic, it was inevitable that the road Ixigo would take to raise future funds would be via an IPO.
CEO and co-founder Aloke Bajpai hinted at this during a wide-ranging interview around this time last year.
When asked what was one of the positives that had emerged out of the pandemic, he said: “It is the realisation that the funding that went into the startup ecosystem is not going to be there forever. There were a lot of hyper-funded companies.
"It’s reset everything to a more equitable environment, it won’t be easy for any company to raise money, and what matters is execution. There will be a lot of casualties, especially in offline corporate travel. The key is to survive the next 12 months and come out shining the other side.”
So clearly, Ixigo, founded in 2006 as a flights product, has not only survived the last 12 months but is now intent on coming out shining the other side.
Le Travenues Technology, the operator of Ixigo, has filed its draft prospectus for a $215 million IPO, which will include around $80 million fresh issue of shares while the rest will be through Offer for Sale (OFS) – with Bajpai and co-founder and CTO Rajnish Kumar participating in the OFS, selling shares of their own.
Prior to the IPO filing, Ixigo also raised $53 million from investors led by Gamnat, an investment firm managed by Singapore sovereign wealth fund GIC Private, according to filings with India’s Ministry of Corporate Affairs. This led to MakeMyTrip making its exit with 8x returns, according to this report.
“On August 9, 2021, we completed the sale of our entire equity investment in the securities of an unlisted entity for a total cash consideration of $38.5 million and recorded a gain on sale of $33.1 million, net of transaction related costs, which will be reflected in our financial results for the six months ending September 30,” MakeMyTrip said, without specifically naming Ixigo. MakeMyTrip had initially invested $4.8 million in Ixigo.
Strengthen unit economics, focus on core
The two co-founders have clearly been paving the way for this listing, and their first task was to achieve profitability and stay there, despite the odds of COVID.
Bajpai told WiT it turned profitable in December 2019 and remained profitable till end of March 2020, until COVID hit. “In 2019, we consciously strengthened unit economics and on turning profitable, that has kept us in good shape. It turned out to be the best decision we made."
One of its smartest moves was to shed ballast and focus on its core business – it did a “part IP, part tech team” deal with SpiceJet in which the latter inherited “Travenues’ airline technology and commerce platform that specialises with its deep tech advancements in mobile apps, cross-selling, payments, ancillaries, among others”.
Said Bajpai at the time, “We realised that given the new realities, we’d be better off focusing on our core B2C business. Travenues was a great idea, we wanted to build the Shopify platform for airlines, using SpiceJet as a customer, and the product was live on their app. But we realized given the circumstances, we are better off focusing on our core business. SpiceJet gets the tech and IP and they will build on it. They have their plan to become an airline tech provider and so, there was a meeting of minds.”
In quick succession, it launched new products to keep traffic coming to its site – a COVID Centre inside its train and flight app, entertainment content to keep customers engaged and, well, entertained during the toughest months of lockdown – some of its videos went viral, and developed Ixigo Assured.
It found ways to acquire customers without spending on traditional channels like Google. “Our marketing spend is not heavy – we have always relied on content, videos, guerrilla marketing and growth hacking. When things bounce back, no one will have any marketing spend,” Bajpai said in the August interview.
Changing future of rail and bus with digitisation
Bajpai also saw huge opportunities in ground transportation. In February, it acquired train ticketing platform Confirmtkt and on August 5, days prior to the IPO filing, it acquired bus ticketing platform AbhiBus.
According to the press release, AbhiBus was the second largest bus aggregator in India in FY-20, selling 26,000 bus tickets per day through its platform. The acquisition will help the Ixigo group to consolidate its presence in Tier 2/3/4 markets by offering a multi-modal transportation experience across trains, flights and buses, to its combined user base of nearly 255 million users (as of May 31).
In its prospectus, Ixigo states: “Bus is the most preferred mode of travel for the teeming masses in both urban and rural India, accounting for the largest share of 65% of all transportation used in India. Of the total road demand, 60% relates to intracity and 40% relates to intercity distances.
"Most of the accessibility of interior Indian villages and Tier III and Tier IV towns to the rest of the country depends on the lifelines created by subsidised government buses that carry passengers, agricultural produce, and small artisanal goods to the nearest towns for sale to the Indian rural population.”
In terms of ticketing mode (online vs offline), Ixigo said: “The overall online penetration is low in the Indian bus market and is limited to intercity buses but is increasing due to the growing information asymmetry being filled by OTAs. In the long-distance bus market, the share of online ticketing was 15% in 2020 (pre-COVID), an increase from 5% in 2012. Online ticketing surged during the pandemic as people opted for contactless digital purchases.
“Presently, a significant 35% of bus-ticketing transactions are conducted online and are forecast to settle at 25% post the end of the pandemic, which is a significant acceleration from the pre-COVID penetration. The share of online payments in the medium-range intercity and intracity buses is negligible. For these categories of buses, the tickets are available from the bus station and are transacted in cash.”
Rail is another key pillar of Ixigo’s business and the acceleration in digitisation in this mode of transport is a trend in favour of the OTA.
Declaring the Indian rail market as worth ₹ 507 billion rail travel market as of 2020, it states in the prospectus, “The Indian rail travel market has significantly evolved with digitisation. The trend of online rail bookings was further increased with the IRCTC online ticketing services introduced in the year 2002. There was a daily inventory of 1.4 million tickets available on the IRCTC in 2019, with a daily volume of booking at 0.825 million tickets on the IRCTC website and app in 2019.
“Even during the first and second COVID-19 wave peaks in 2020 and in 2021, respectively, daily ticket bookings remained at 50% with over 400,000 daily bookings. In non-peak times and during the COVID-19 waves, daily ticket bookings peaked at 1million daily tickets. Railway ticket bookings started off as a sole offline booking service with 70% being booked offline in 2009.
“Within 4 years, online ticketing took over as the major mode of booking. In 2020, 85% of Indian railway tickets were booked online, with the remaining still being booked offline on passenger reservation system (PRS) ticket counters. Of the online proportion, 75% of tickets are booked directly via the IRCTC and 25% via OTAs and other platforms.”
Rail and bus have been crucial to Ixigo’s performance at this time when flights remain elusive.
In this news report, it was stated: “All OTA players witnessed a significant decline in gross booking volumes and gross booking values during Fiscal 2021 across all segments, notably air and hospitality. Only, Ixigo appears to have shown a negligible decline in the GTV compared to the steep decline in the GTVs of its peers. Ixigo’s gross booking value was impacted marginally by the pandemic showing a decrease of merely 6.1% in Fiscal 21, and it seems to be the OTA that weathered the COVID storm well.
“In 2021, Ixigo trains, ConfirmTkt and Ixigo flights have collectively seen the highest usage and engagement among all key OTA players and standalone transactional train mobile apps in India in terms of Monthly Active Users and sessions.”
Underpinning all that of course is the potential of the Indian market and the next billion Internet users (NBUs).
Said Ixigo in its prospectus: “The total Indian travel market grew at a CAGR of 10% reaching ₹ 3.90 trillion in 2020 when the travel industry was impacted by COVID-19. This market size is expected to grow by 7% and reach ₹ 5.01 trillion by 2024. The ‘next billion users’ travel market accounts for 90% of the train and bus segments each, 50% of the flights segment and 55% of the hotels segment in 2020. This weighs in at over 62% of the overall travel market and amounts to ₹ 2,430 billion in 2020.”
Clearly an IPO to watch in a battered, competive, thin-margin industry – it will be interesting to see what appetite investors have at this time.
* This article originally appeared on WebInTravel.