We hope to be profitable by FY19: Dhruv Shringi

Dhruv Shringi, co-founder and chief executive of Yatra.com

Yatra.com, the decade-old online travel agency (OTA), recently became the second Indian one in this segment to list at Nasdaq in the US (MakeMyTrip was the first OTA); market capitalisation is $275 million. The task at hand for DHRUV SHRINGI, co-founder and chief executive, is to expand the customer base and turn profitable, he tells Ajay Modi. Edited excerpts:

What triggered the reverse merger deal at Yatra last year and how have things changed after the Nasdaq listing?

We were initially (in early 2016) looking at the IPO (initial public offer of equity) market to go public but the market in the US was soft. One of our investors, Macquarie, brought us the deal and it solved a number of things. It gave us access to $92.5 million and we are adequately capitalised for expansion and growth. It took us public and also created an opportunity to raise follow-on capital when needed.

What areas need investment?

The aviation industry is growing at about 20 per cent (annually). This growth should continue. A newer set of consumers from Tier-II and Tier-III markets are now flying. We want to invest in taking our brand to these people. Another area of investment is technology, especially on mobiles that now bring 70 per cent of traffic. We are also building our homestay product. We feel the inventory on the hotel side could start becoming a constraint in two-three years, as demand is growing faster than supply. Homestays will offer an affordable option for budget travellers. 

Discounts seem a key growth trigger for online bookings. Is this sustainable?

We have always believed that this is not the right model. At Yatra, we consciously stay away from consistent deep discounting, except for certain times of the year. We don’t intend to keep discounting. Our focus has been on building supply. 

Today, we have got the largest platform of 62,000 hotels, compared to 34,000 for MakeMyTrip. The effort is to unearth quality supply and bring it online. If you do that, you don’t need to artificially discount to meet the customer’s price points. If I have a good quality hotel at Rs 1,000, I don’t need to sell the Rs 3,000 room for Rs 1,000. Discounting is channelising money to customers, who will stop buying once the discount goes away.

How does the consolidation (MakeMyTrip’s merger with Ibibo) in online travel impact you? Do you see a need to partner?

Consolidation is a step in the right direction. We should see some rationalisation of discounting and the price war subsidising. That’s the key tenet, at least what they (MakeMyTrip-Ibibo) stated. We don’t need a partner at this moment, as we are capitalised. If any strategic opportunity comes, we will evaluate. The good thing is that it is now a choice, not a necessity.

Travel is attracting top e-commerce players like Paytm. How will this impact the incumbents? 

People like Paytm will help expand the market, as they will bring a new set of users to the online travel. It is good from a market development view. But, it adds a new competitor. There will always be short-term blips, with competition coming in. There will always be some irrational players who will enter the market. The key thing is to focus on the experience you are offering to repeat customers. Paytm will also have to figure out which battles they want to fight. They have so many fronts open, from bus and rail bookings to e-commerce, mobile recharge and cashbacks. Capital is scarce at the end of the day and, at some point, one will need to prioritise. 

How far is profitability for online travel companies?

We are looking at becoming profitable by FY19. Our model is built on a higher degree of repeat usage. Our corporate and B2B (business to business) channels remain profitable and continue to grow profitably. The repeat customer base keeps setting down the cost of acquisition. You get to that stage where operating leverage comes through and, hence, break-even and profitability will happen. For the competition, it will be a function of what they do on the discounting front.