Ebix, a seller of software to insurance companies for four decades, has recently been expanding its presence in the travel sector, particularly in India.

Yatra — a corporate travel services provider and India’s second largest online travel agency after MakeMyTrip Group — said Tuesday it had begun doing due diligence to consider an offer from Ebix to take it private by mid-May for about $336 million.

Ebix, a public company based in Johns Creek, Georgia, provides software to many sectors. Ebix sees Gurgaon-based Yatra as the largest of several companies it has recently acquired to build a group that cross-sells travel services like foreign exchange to corporate clients and consumers. Ebix aims to spin that travel subsidiary out.

A New IPO?

For full-year 2018, Ebix generated $497.8 million in revenue — a 37 percent rise year-over-year. However, its biggest segment is its foreign exchange unit.

Ebix offers currency exchange through its subsidiary EbixCash, one of Southeast Asia’s travel money exchanges, with more than 110,000 distribution outlets and 8,000 corporate clients. The company forecasts the unit will generate about $350 million in revenue in 2019 on a stand-alone basis.

Ebix said in a statement that it might merge Yatra with EbixCash, which already has 9,000-plus employees.

“We see India as a multibillion-dollar opportunity, possibly in the short term depending on how we execute,” Robin Raina, chairman and CEO of Ebix, said during a March earnings call with investors before publicizing an acquisition bid for Yatra.

“We are seriously contemplating the possibility of a public IPO for our Indian operations in 2019 or early 2020, and are in active discussions with a few private equity players to see if we can set up a pre-valuation benchmark,” Raina said. The company was unable to provide clarity via an executive interview by publication time.

A Travel Services Roll-up

In October 2017, Ebix tip-toed into the travel sector by buying Indian online travel company Via for $75 million. The online travel agency Via claims to have tens of thousands of home-based travel agents as resellers in India, too.

In April 2018, Ebix by acquiring foreign exchange service and Centrum Direct. In January 2019, it purchased Weizmann Forex, SL Forex, and Essel Forex.

Today Ebix claims about three-quarters market share of foreign exchange sales at India’s 32 international airports. It has benefited from India having a controlled currency. When traveling abroad, Indians must file paperwork about the amount of money they’re taking out of the country, and the sales of foreign currency exchange services are more popular in India than in some other countries as a result.

In August 2018, Ebix bought a controlling share in two travel agencies — Mercury Travels and Leisure Corp. — for a combined sum of $14.2 million. Leisure Corp.’s flagship service was corporate meetings and conferences, and Mercury Travel had a mix of corporate and adventure travel sales.

Ebix created a travel division called Mercury based on the components. It later added Pearl International Tours & Travel, Lawson Travel & Tours, and Business Travels.

Ebix intends to package all of these travel units into its EbixCash subsidiary, with more than 2,200 employees and more than 9,800 corporate clients before adding Yatra.

An Exit for Yatra

Home-grown travel company Yatra, which listed on the stock exchange in 2016, continues to claim to have the largest domestic Indian hotel supply of online players, with more than 100,000 listings. In the past half-year, Agoda, the Booking Holdings brand based in Asia, has been sourcing Indian properties from it.

However, Yatra has had to fight hard since MakeMyTrip merged with rival Ibibo in 2016 and MakeMyTrip raised $330 million from Ctrip and Naspers in 2017. Yatra’s share of consumer hotel bookings has shrunk to less than 10 percent, while MakeMyTrip brands account for about 70 percent and Booking.com holds 20 percent share.

In early 2018, Yatra racked up losses. However, in the last three months of 2018, it eked out a profit of $2 million on revenue of $31.7 million, after laying off about 10 percent of its workforce, closing its handful of bricks-and-mortar retail shops and outsourcing its call center.

Yatra’s consumer audience may offer a new market for Ebix to cross-sell its services.

More interestingly for Ebix, though, is that Yatra has invested heavily in cracking the corporate travel market, too. Ebix may see corporate customers as a more lucrative and reliable set of customers. In a telling detail, its public statements about Yatra describe it as a corporate services company rather than a travel agency.

In 2017, Yatra acquired Air Travel Bureau, a corporate bookings company that served more than 400 large and medium-sized businesses across India. That helped Yatra claim to be the largest independent provider of self-booking tools to corporations for booking flights, hotels, and insurance as measured by gross booking volume.

In February 2019, Ebix took an 80 percent controlling stake in India-based Zillious, that provides software to corporate travel agencies. Last year Zillious processed more than 8 million travel bookings.

Ebix seems likely to pair Yatra’s corporate travel services with Zillious’s somewhat overlapping ones to offer branded business travel software services in India. It may also white-label the services and allow various international travel aggregators to sell them to their corporate clients.

Paydays on Two Continents

Yatra faces an offer from Ebix it probably can’t refuse. Ebix’s generous takeover bid offers an 84 percent premium on Yatra’s market valuation as of the day of its bid.

In 2016, Yatra went public through a reverse merger with the U.S. special purpose acquisition company Terrapin 3, raising $92.5 million.

For its part, most of Ebix’s investments in India are in the form of loans granted to its Indian subsidiaries. So the goal of an initial public offering for EbixCash would be to recoup that cash to repay its loans and to expand its software business based in the U.S. Foreign exchange, including EbixCash operations, continued to be Ebix’s largest segment, accounting for 80 percent of the company’s full-year 2018 revenue.

“The overall Indian economy is growing at about 7 percent, but domestic business travel is growing at about 12 percent and is also ripe for the adoption of more efficient technology,” said Dhruv Shringi, co-founder and CEO of Yatra in an interview for January’s What India Reveals About the Future of Online Travel: A Skift Deep Dive.

Ebix and Yatra’s corporate travel aspirations have focused on the domestic business market. However, India’s outbound travel spending is expected to grow rapidly. Skift Research subscribers can learn more in the The State of India Outbound Travel 2018 report.

Photo Credit: Ebix chairman and CEO Robin Raina talks at Ebix Presents TV18 India Rising Summit 2019, a pan-India thought leadership effort sponsored by Raina's U.S.-based software company. Ebix has bid to acquire Yatra, an online travel company in India, as part of Ebix's expansion into travel services. Ebix