“Profitability & Growth Need To Go Hand In Hand -- Growth Without Profitability Is Rather Meaningless”

The IPO fillings in FY23 halved as compared to FY22, given the prevailing macroeconomic conditions last year. Now that EbixCash has got the nod for its IPO, how do you see the market sentiment at present which makes it the right time for EbixCash to hit the primary market?

As a prudent company, we focus on our fundamentals rather than just market sentiment. Our fundamentals are strong; if the markets perform well, that is icing on the cake. But even if the market would not have been performing well, we would still like to believe in our fundamentals. When times are tough, people look for good stories -- companies that are growing consistently, while being consistently profitable. And with EbixCash, I believe that we have that story.

What are the key areas where the proceeds from this IPO would be utilised? Which are the business segments that you wish to expand aggressively?

It’s going to be a 100 per cent primary issue with proceeds earmarked for three things – Rs 1,200 crore for working capital requirements to fund our growing businesses, purchase of convertible debt instrument for approximately Rs 2,800 crore to retire convertible debt from the parent company, and the remaining proceeds will be utilised for organic and inorganic growth initiatives of the company. The company essentially has no other external debt.

In FY23 EbixCash reported a 46 per cent YoY increase in its revenue from operations, and a 55 per cent YoY rise in its net profit. How do you describe this growth? What is the ‘Robin Raina mantra’ of profitability that others have failed to crack?

We had CAGR of 52.6 per cent between FY21 and FY23. Our FY23 EBITDA margins stood at 36.1 per cent. I do not know about the Robin Raina mantra; but I can tell you that I believe in keeping the financial vision simple. I am a big proponent of the simple common sense thought that selling price should be a lot more than the cost price. I always say that there is no shame in making money. Once you have the ability to generate income and cash consistently, you are setting the basis for a fundamentally strong enterprise and you will be able to grow all your businesses faster than others. If one looks at the EbixCash track record in India, you will see that our mantra has been profitability all through the 23 years of our existence in India. Profitability accompanied by growth has been our focus all through these years consistently.

The EbixCash story is rather simple; we did not want to grow for the sake of growth; we were always focused on consistent profitable growth. The other thing is, if you want a high degree of profit, you must have a MOAT; you should have something that differentiates your business. In our case, we built our business on the basis of platform-as-a-service products, that rides on our technology focus. EbixCash is a fintech story; with 52 per cent of our revenues coming from the fintech areas of our business. 

Beyond that, we have been always focused on customer diversity. If you want to insulate your company, then amongst other things, you must have a highly diverse customer base. Otherwise, if a few large clients terminated their contracts, then it could really hurt the company in terms of profitability and revenue streams. We do not have that problem. Of course, customer retention is key too; if you can retain your clients, your revenue will become more recurring, and you build a business model whereby every new client you add beyond a threshold number results in increased profitability.

How would you trace EbixCash’s journey in India and the path towards organic growth?

EbixCash started operating in India in 2001. Since then we have been through three phases – 2001 to 2016 was a period wherein we created platform-as-a-service on-demand fintech products for the insurance industry worldwide. The period from 2017 to 2019 was one of inorganic growth with EbixCash making acquisitions in the areas of fintech, financial exchanges and travel industry. The period 2020 onwards would primarily be known for the organic growth experienced in the EbixCash businesses, with the company clocking 52.6 per cent CAGR between FY21 to FY 23. One common thread through all these years has been that EbixCash exhibited consistent profitability through each of these years, including the Covid-19 period.

Some business segments in which you operate are very competitive and price sensitive. Given your focus on profitability, and especially when we look at discounting by some competitors, do you think it can affect your transaction volumes?

Not really, because among our business segments, 52.6 per cent of it is platform-as-a-service. We are not price sensitive here because we have emerged as a key technology player providing mission-critical services to our clients. We are deeply entrenched and as long as we continue to provide world-class services, we will not need to aggressively under-price ourselves against our competition. 

Our next big segment is payment solutions which accounts for approximately 26 per cent of our business. In that, there are two key segments – inward money remittances and foreign exchange services. In the area of inward money remittance, the biggest reason the world’s top-3 MTOs utilise us is because of our vast distribution network. We are paid because of the efficiency and reach associated with that network, rather than on the basis of our pricing competitiveness. 

The foreign exchange business could be reasonably price sensitive. However, the price sensitivity is different in different segments of this business. It also depends on whether our competition can even service a particular currency, the expansiveness and efficiency of our reach amongst other things, including our presence at key international airports, seaports, five-star hotels, etc. and whether that presence is exclusive or non-exclusive. 

In the travel segment, parts of our business are price sensitive while others are not as sensitive. Take, for example, the B2C business where you are going to the consumer to sell tickets over the web. We decided we were happy not being number one or two in the business in India in the B2C area. We decided that we did not want to subsidise the sale of travel products and lose money like many of our esteemed competitors. We decided to focus our travel efforts in areas where we have less price sensitivity and where we can be one of the leaders – areas like events travel, corporate travel and B2B travel. Also, we focused our attention on international geographies like the Asean countries, where price sensitivity is lower and thus profitability is higher. 

If somebody wants to sell at a loss, that's their problem; we need to respect their decision and move on and follow our own business mantra, which for us revolves around profitability.

How do you plan to increase the customer touch points as well as improve the backend technology side to handle the large volumes of transactions?

On the technology side, the key part is that we have cutting-edge proven technology, that is not a greenfield trial effort. Our technology is on-demand, SaaS, highly scalable and open architecture oriented. Even in areas where might be a dominating player, we continue to enhance our technology. 

As regards touch points, of course, we would endeavour to continue increasing the touch points. Today, we have 650,000-plus touch points. And we want to continue growing that. We also want to increase our presence internationally further. We are there in 70+ countries today. Our financial systems are already deployed across 60-plus countries; our insurance systems are deployed across 70-plus countries. So, we have mature technology and reach, but we will endeavour to continue increasing it over the next few years.

What is the valuation the company is looking at? What is the story with which you are going to investors considering the valuation game that we saw with some of the players in this space and the post-listing debacle?

I believe that a high or low valuation is a relative concept, that can only be seen best from the eye of the investors. Ours is a 100 per cent primary issue. No senior management person or promoter has any goal of selling any part of their stake. Ideally, we want to have a valuation wherein we are perceived to be leaving money on the table with respect to other listed companies, for our investors.  

Our job should be to try to create consistent and sustainable value for our investor by focusing on our fundamentals. The EbixCash management needs to focus on the fundamentals, on the strength of the balance sheet, the revenue stream growth, the strength of our products, the efficiency we bring for all the constituents who use our services and, of course, most importantly, EbixCash profitability and operating cash flows. The valuation is something the bankers and investors are going to focus on. 

From a management and company perspective, our thought process is rather simple. We want a value whereby investors feel that enough value is left in the market. I would consider my IPO successful only if people at the lower-middle and middle-class levels have invested in it and made a decent amount of money. There is no point in delivering an IPO, wherein a company is perceived to have dumped its stock and booked profits at the cost of the public investors. We just do not subscribe to that thought process. That is not the thinking with which we want to list the company – I would consider our IPO a success, only if investors on the street make money on our IPO and feel that the company left money on the table.