Ebix: No Flights Of Fancy
If one were to travel from Delhi to London, one would need visa, airline tickets, hotels, travel insurance, health insurance, forex, cabs on both sides, and a few other sundry services. Naturally, one would have to requisition the services of three to four companies for the round trip. It’s a business opportunity that Ebix has capitalised on – it offers all these services at one go.
With no real competition that matches the expanse of its vision, Ebix has positioned itself to seize an ‘ideal greenfield opportunity’, says a vision statement. It is a leading international supplier of on-demand software and e-commerce services to the insurance, financial and healthcare industries. Ebix aspires to become the world’s largest fintech player that can “converge all financial and insurance services”. In financial systems alone, EbixCash, its Indian subsidiary, today handles a gross merchandise value (GMV) of $15 billion. Add to the bouquet travel and healthcare, and it’s a company that is giving a shareholder return of 26,500 per cent!
Coinciding with the Ebix journey in the last two decades is the journey of Robin Raina, its flamboyant CEO and Group Chairman, who took over in 2000, and never looked back.
When he joined the company in 1999 (he was elevated as its CEO in 2000 December), Ebix was reasonably small — it had logged $11 million in revenues with $19 million of losses.
Since then, the company has had 20 years (and 80 quarters) of sequential growth, and it has often featured amongst the fastest-growing companies globally.
Through its golden run, Ebix has seen operating margins and profit before tax of more than 30 per cent. Before its India foray, its profits were in the range of 40 per cent before taxes. The investments in India — more than $1 billion since the India journey began in 2017 — caused its margins to dip and therefor the focus currently is on keeping the operating margins above 30 per cent.
“Ebix (under my stewardship) has been a story of consistency that I am proud of,” says Raina, in an exclusive conversation with BW Businessworld at his plush Noida office in the National Capital Region.
But how did he manage to have 80 quarters of sequential growth?
“I’m a big believer in simple things of life. As a company, you always need to be highly focused on ensuring that your selling price is a lot more than the cost price. You need to continually evolve. If I said to you that in 2000 I formed a business strategy, came up with a vision and have stuck to it and I was very proud of it, then I would say that would be my biggest mistake. Your vision needs to be adaptive to change. Every year, you need to relook at your vision and ask, Am I adapting to the current environment / technology / current trends of the business, and am I functionally becoming the leader? You need to be a few years ahead of your competition.”
With operations in 50-plus countries, Ebix today has around 9,000 employees, and their number is slated to go up to 12,000 in the next few months.
From an India perspective, Raina is building a subsidiary called EbixCash, which he wants to become India’s first financial system brand and a financial system exchange — an MNC out of India.
“People like to think forex separately, telemedicine separately, travel separately and so on. Ebix doesn’t think that, Ebix thinks it’s all about providing value to the consumer. We want to create EbixCash as a brand. We would like to go for an IPO in the beginning of next year and take the EbixCash brand across the world, while headquartered in India,” says Raina.
EbixCash has a ‘phygital’ strategy that combines more than 320,000 physical distribution outlets to an omni-channel online platform. It has established an Enterprise Financial Exchange portfolio that encompasses leadership in digital payment solutions, money transfers, travel, insurance and corporate solutions.
“So, what I am building can be India’s largest financial system based MNC, an MNC with intellectual property residing in India. It is something that PM Narendra Modi calls ‘Make in India’ — I’m a big believer in the ‘Make in India’ dream,” adds Raina.
The Yatra Trajectory
Raina has bet big on India. In May 2017, after its India foray, Ebix acquired 80 per cent stake in ItzCash for Rs 800 crore. Later, it forked out Rs 1,200 crore for Centrum Direct — Centrum group’s forex business. Through its India journey, it has acquired more than 10 companies spanning foreign exchange, remittance, education, and of course, travel.
In travel, it acquired online travel portal Via.com besides the Delhi-based Leisure Corp and Mumbai-based Mercury Travels to create a niche vertical.It’s the Yatra acquisition — the biggest by Ebix in India so far — however, that has got the market abuzz. The new entity is seen challenging the dominance of MakeMyTrip-GoIbibo in the B2C segment.
The new entity may be called Ebix-Yatra. Mercury will now be the group’s luxury and events travel brand.
But why this love for the travel portfolio? For Raina, this has also been a challenge. Travel was the only domain where the group was not a leader. Otherwise, the group has been a leader whatever business / market it has entered.
Says Raina: “Travel is one of the highest-growth industries in India. Indians are among the highest spenders as travellers across the world. It’s creating opportunities in airline travel, train travel, bus travel. Yes, bus travel will never go out of fashion in India. One of the differences that we bring to the travel portfolio in India is that not only do we do distribution of travel in India, we do distribution of travel across the world. For instance, we are No. 1 in the Philippines; we are No. 3 in Indonesia; this year we intend taking travel to the US, Brazil and Europe and so on.”
The Yatra acquisition is valued around Rs 2,310 crore. Since Yatra holds considerable debt, the eventual price of the deal would be around Rs 1,700 crore.
Dhruv Shringi, Co-founder and CEO, Yatra Online, says: “Becoming a part of Ebix’s EbixCash travel portfolio will enable us to continue on the growth path. As part of a larger diversified organisation with the necessary scale and resources to be a leader in today’s dynamic travel marketplace, we will provide more options and an enhanced experience for our joint customers and will be an even stronger partner to the airline, hotel, car rental and other businesses we work with. We are confident that combining Yatra’s loyal customer base, comprehensive service offering and multi-channel platform with Ebix’s complementary Via and Mercury businesses, will create a leading online travel platform and India’s largest corporate travel platform that will capture growth opportunities and deliver enhanced value to shareholders.”
Raina adds, “The acquisition of Yatra would lend itself to significant synergies and the emergence of EbixCash as India’s largest and most profitable travel services company, besides being the largest enterprise financial exchange in the country. Over the last few months, we have evolved a detailed synergistic plan that once fully executed can provide between 40 to 75 cents of accretion to the Ebix non-GAAP EPS. We are excited by the cross-selling opportunities that this combination provides us, while further strengthening our future EbixCash IPO offering.”Commenting on the acquisition, an observer, Joseph Jayakumar, Director, Amstar Technologies, says: “Now, when these bookings happen there will also be the aspect of bundled insurance and that’s where Ebix plans to capture the untapped space along with having a robust channel partner network which currently is pegged at more than Rs 25,000 crore. When these travellers opt for travel, insurance becomes a must and with so many aggregators out there, Ebix believes in leading the pack by merging both sectors organically to give the customers a best buy benefit of the best rack rate of travel packages in a multi-segment package as mentioned above. This move also gives them the best quote for their insurance packed with the travel plan which is a win-win strategy for both Ebix and the customers giving other contenders a run for their money.”
Acquisition to be a Milestone
Prior to the acquisition, speaking with BW Businessworld, Raina had said that the Yatra acquisition was going to be a milestone, especially because Yatra is a market leader in the B2B space. “We wanted this deal to happen. Our goals are simple. We already pooled $2.5 billion of GMV in travel. Post-Yatra acquisition, it would have $4 billion of GMV, we would be the undisputed leader in B2B and corporate segments,” he had said.
Yatra now will become an integral part of the Ebix travel portfolio and it will generate 30 per cent-plus operating margins (like the rest of Ebix), feels Raina.
With the new kid on the block, the travel space suddenly looks a lot more exciting, especially with the competition hotting up.
When BW Businessworld quizzed MakeMyTrip founder Deep Kalra on the imminent threat from a formidable competitor, he said: “We welcome any kind of competition.”
When asked about the competition from MakeMyTrip, Raina says: “They are No. 1 in B2C. But in the coming years we are going to give them a tough time.”
Yatra’s business model, however, is going to be markedly different. Explains Raina: “If I read their (MakeMyTrip’s) financials, they lose quite a bit of money. We don’t intend to do that by giving away money or subsidising hotels or airlines. We’re going to do things on our terms. We have some kind of a plan, but I wouldn’t worry about it right now. I think I am focused on B2B and corporate segments and want to be the number one there first.”
With the new acquisition, Ebix-Yatra hopes to become the domain leader. It already handles $5 billion of foreign exchange in India, and has a presence in 25 international airports.
Insurance is the Mainstay
The excitement around travel notwithstanding, insurance remains the mainstay of Ebix, it being the largest insurance exchange in the world, with “hundreds of billions of premiums on its platform across markets like Australia, Latin America, New Zealand and Singapore”. In the US, it dominates the sectors it is present in.
In India, it recently signed a joint venture with the Bombay Stock Exchange, and is waiting for an IRDA approval for a few new ventures. “We have already built the technology; our goal is to sell insurance through many channels — we want to sell insurance through mom-and-pop shops; we want to sell through 320,000 franchises that EbixCash has. We want to provide foolproof devices — eleven-and-a-half-inch wireless devices, which can be used in every corner of the country at the last mile, for the people to digitally sell insurance and buy the insurance in minutes while being completely non-aligned,” says Raina by the way of explaining his India roadmap.
The Challenges
It’s not all hunky dory for Ebix, though, feel some analysts. Amstar’s Jayakumar says: “At present, Ebix is diversifying indiscriminately without assessing the future of fintech / BFSI environment in India. While this may sound good globally for a risk-taker, the aspect of Blockchain, system implementations, and legacy system migration are issues which have to be properly addressed in the insurance domain.”
The India Story
Raina, born in Kashmir and educated in Punjab, is a US passport holder. But his heart clearly is in the land of his birth. He thinks Narendra Modi is the best PM India has had, and swears by his ‘Make in India’ vision.
But challenges abound, too. For one, feels Raina, the government needs to deregulate some of the sectors, for instance, insurance. Like other industry captains, he feels that the corporate taxes are a wee bit too high here, and the structure needs to be a lot better.
“Look at how the software boom happened when the government gave them tax concessions. India became an IT giant. So, I strongly feel the government needs to rationalise taxes,” says Raina, warning that companies may even look at outward destinations if this anomaly is not addressed.
The Modi government has seen rapid strides in infrastructure development, but according to Raina, a lot more still needs to be done. “If we are to be a leader, the infrastructure needs to be at par, or very close to, where China is today,” he says.
Coming to his favourite subject, Raina says that “India needs to build intellectual property like HERO did; like Bajaj has done; like Mahindra has done”. “It’s only through intellectual property that one can have global ambitions,” he says, adding that “this remains a high-priority zone for Ebix”.
“I will always remain an Indian at heart. I want to contribute to the growth of India by generating more employment, and also by giving back, by ensuring that Ebix is a responsible company that helps in community building and helps in social work around the country,” says Raina.
Compassionate Capitalism
With capitalism facing newer challenges, many corporate leaders have championed “compassionate capitalism”. In India two foremost proponents of the idea are Azim Premji and N.R. Narayana Murthy. Raina, too, says he is a firm believer in compassionate capitalism. “I look up to Warren Buffett and Azim Premji. Premji has been an icon to Indians in terms of how much he gives away,” he says.
Raina founded the Robin Raina Foundation that works for the underprivileged. The foundation started a project to build 6,000 homes in 2003 for the slum-dwellers of Bawana in Delhi, and so far, 2,034 of them have been completed.
He also contributed towards Imran Khan’s cancer hospital (ward number 224) “because charity doesn’t know anyone; pain feels the same — whether you’re a Hindu, a Muslim, an Indian, a Pakistani, or whatever”.
Raina says India could see a revolution “if every young Indian decides to support the education of an underprivileged child”. “My dream is not to create a $3-4 billion company. My dreams are a lot bigger than that,” he says.
Raina has been variously described as a “visionary leader”, “big risk-taker with a big appetite”. He, however, offers a grounded view, by way of his parting shot: “Wall Street respects only one colour and that is the colour of money. As long as you can deliver value to them, they will respect you and you’re only as good as what you deliver for them today. If Robin Raina has delivered for 20 years that will have some value, but it may not have enough value.”
