Yatra(US:YTRA)2020-07-31 21:26PART I Item 3. KEY INFORMATION This section presents Yatra Online's selected consolidated financial data and key risk factors from FY2016-2020, covering pandemic, merger, business, and operational risks Selected Consolidated Financial Data Key financial data shows a 22.4% revenue decline in FY2020 to INR 7,259.4 million, narrowed losses, and significant drops in gross bookings Consolidated Statement of Profit or Loss Highlights (INR thousands) | Indicator | FY 2018 | FY 2019 | FY 2020 | | :--- | :--- | :--- | :--- | | Total revenue | 12,248,513 | 9,358,580 | 7,259,355 | | Results from operations | (3,360,133) | (2,578,199) | (625,054) | | Loss for the period | (4,051,976) | (1,193,595) | (840,195) | | Basic Loss per share (INR) | (116.41) | (26.37) | (17.94) | | Diluted Loss per share (INR) | (116.41) | (26.95) | (17.94) | Consolidated Statement of Financial Position Highlights (INR thousands) | Indicator | As of March 31, 2018 | As of March 31, 2019 | As of March 31, 2020 | | :--- | :--- | :--- | :--- | | Total assets | 11,616,787 | 12,551,897 | 8,758,190 | | Total liabilities | 11,842,066 | 10,172,727 | 7,247,216 | | Total equity | (224,918) | 2,359,749 | 1,491,941 | Key Operational Metrics (Figures in thousands) | Metric | FY 2018 | FY 2019 | FY 2020 | | :--- | :--- | :--- | :--- | | Air Passengers | 8,875 | 10,163 | 8,179 | | Hotel room nights | 2,098 | 2,341 | 1,200 | | Gross Bookings (Air Ticketing, INR) | 79,156,190 | 97,638,313 | 77,411,328 | | Gross Bookings (Hotels and Packages, INR) | 13,386,288 | 13,511,914 | 7,895,916 | | Adjusted Revenue (Total, INR) | 7,407,757 | 8,911,013 | 5,982,428 | - Effective April 1, 2018, the company adopted IFRS 15, reclassifying certain customer inducement and acquisition costs from marketing expenses to an offset against revenue38 Risk Factors The company faces substantial risks from the COVID-19 pandemic, terminated Ebix merger, operating losses, intense competition, supplier reliance, and potential NASDAQ delisting - The COVID-19 pandemic severely restricted global economic activity, negatively impacting the travel industry with high cancellations and material negative cash flow52 - The company terminated its merger agreement with Ebix, Inc. and initiated litigation, posing risks of substantial legal costs, management distraction, and adverse impacts on share price and operations5861 - The company has a history of operating losses, with net losses of INR 840.2 million in FY2020, INR 1,193.6 million in FY2019, and INR 4,052.0 million in FY2018, with no guarantee of future profitability62 - The Indian travel industry is highly competitive, with pressure from OTAs (e.g., MakeMyTrip), traditional companies, and new entrants, potentially reducing service fees and Net Revenue Margins6667 - A substantial portion of Air Ticketing revenue relies on a small number of domestic Indian airlines, exposing the business to industry risks like supplier bargaining power and airline insolvencies8076 - The company received a NASDAQ non-compliance notification for failing to meet the $1.00 minimum bid price, risking delisting which would adversely affect stock liquidity and capital raising ability203204205 Item 4. INFORMATION ON THE COMPANY This section provides a comprehensive overview of Yatra Online, Inc., detailing its history, business model, services, and operational structure History and Development of the Company Yatra Online, Inc., incorporated in the Cayman Islands in 2005, commenced operations in India in 2006 and is a leading online travel company - Yatra Online, Inc. is a Cayman Islands exempted company, incorporated on December 15, 2005, with its principal executive office in Gurugram, India243 - The company commenced operations in August 2006 and has grown to become a leading online travel company in India, serving both leisure and business travelers244 Business Overview Yatra provides comprehensive travel services through B2C, B2E, and B2B2C channels, with recent developments dominated by the COVID-19 pandemic and the terminated Ebix merger - Yatra offers a wide range of travel services including domestic and international air ticketing, bus and rail ticketing, cab bookings, and access to approximately 102,000 hotels and homestays in India and over 1.6 million hotels globally as of June 30, 2020246 - The company employs a multi-channel go-to-market strategy: B2C (direct to consumer), B2E (corporate clients, with over 700 large customers), and B2B2C (a network of approximately 26,000 travel agents)248277278 - The COVID-19 pandemic has had a significant negative effect on the business, leading to unprecedented cancellations, negative cash flow, and the implementation of cost-reduction initiatives258 - On June 5, 2020, Yatra terminated its merger agreement with Ebix, Inc. and filed a lawsuit against Ebix for alleged breaches of the agreement266 Key Performance Indicators (FY2020 vs FY2019) | Metric | FY 2019 | FY 2020 | Change | | :--- | :--- | :--- | :--- | | Revenue (INR M) | 9,358.6 | 7,259.4 | -22.4% | | Adjusted Revenue (INR M) | 8,911.0 | 5,982.4 | -32.9% | | Gross Bookings (Air & Hotels, INR B) | 111.1 | 85.3 | -23.3% | | Net Loss (INR M) | (1,193.6) | (840.2) | Narrowed | - The company's growth strategy includes cost-effectively growing its customer base, leveraging its multi-channel approach and loyalty programs (eCash), investing in its technology platform, focusing on Tier 2 and Tier 3 markets, and pursuing strategic acquisitions like ATB and TCIL318320321 Item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS This section analyzes Yatra's financial condition and operating results, detailing the impact of COVID-19 and the Ebix merger, key metrics, liquidity, and non-IFRS measures Key Operating Metrics Key operating metrics show a significant downturn in FY2020, with Total Gross Bookings falling to INR 85.3 billion and Adjusted Revenue decreasing to INR 5.98 billion Gross Bookings (INR thousands) | Segment | FY 2018 | FY 2019 | FY 2020 | | :--- | :--- | :--- | :--- | | Air ticketing | 79,156,190 | 97,638,313 | 77,411,328 | | Hotels and packages | 13,386,288 | 13,511,914 | 7,895,916 | | Total | 92,542,478 | 111,150,227 | 85,307,244 | Reconciliation of Revenue to Adjusted Revenue (INR thousands) | Description | FY 2018 | FY 2019 | FY 2020 | | :--- | :--- | :--- | :--- | | Revenue (IFRS) | 12,248,513 | 9,358,580 | 7,259,355 | | Add: Customer promotional expenses | - | 3,571,451 | 1,486,371 | | Less: Service cost | (4,930,757) | (4,282,803) | (2,922,929) | | Add: Other Income | 90,001 | 263,785 | 159,631 | | Adjusted Revenue (Non-IFRS) | 7,407,757 | 8,911,013 | 5,982,428 | Net Revenue Margins (%) | Segment | FY 2018 | FY 2019 | FY 2020 | | :--- | :--- | :--- | :--- | | Air Ticketing | 6.3% | 5.8% | 5.1% | | Hotels and Packages | 12.7% | 13.9% | 9.9% | Results of Operations Yatra's FY2020 operating results show a 22.4% revenue decrease to INR 7,259.4 million, but a 75.8% improvement in operating loss due to reduced expenses Fiscal Year 2020 vs. 2019 Performance (INR thousands) | Metric | FY 2019 | FY 2020 | % Change | | :--- | :--- | :--- | :--- | | Total revenue | 9,358,580 | 7,259,355 | -22.4% | | Adjusted Revenue | 8,911,013 | 5,982,428 | -32.9% | | Results from operations | (2,578,199) | (625,054) | 75.8% improvement | | Loss for the year | (1,193,595) | (840,195) | 29.6% improvement | | Marketing & sales promotion expenses | 809,996 | 196,209 | -75.8% | - In FY2020, Adjusted Revenue from Air Ticketing decreased by 30.7%, and Adjusted Revenue from Hotels and Packages decreased by 58.3%, reflecting the severe impact on both segments531533535 - A goodwill impairment charge of INR 222.0 million was recorded in Q4 FY2020 due to the negative impact of the COVID-19 pandemic on the travel industry544 - In FY2019, total revenue decreased 23.6% from FY2018, primarily due to the adoption of IFRS 15, though Adjusted Revenue increased by 20.3% to INR 8,911.0 million555557 Liquidity and Capital Resources As of March 31, 2020, Yatra's liquidity included INR 1,365.4 million in cash and INR 755.3 million in term deposits, with net cash used in operating activities significantly improving to INR 550.4 million Liquidity Position (INR millions) | Item | As of March 31, 2019 | As of March 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | 2,161.0 | 1,365.4 | | Term deposits | 1,029.5 | 755.3 | | Pledged term deposits | 1,015.3 | 633.4 | Summary of Cash Flows (INR thousands) | Cash Flow Activity | FY 2019 | FY 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | (3,542,134) | (550,356) | | Net cash (used in)/from investing activities | (650,325) | 96,643 | | Net cash from/(used in) financing activities | 2,904,580 | (333,471) | - The company breached certain debt covenants with ICICI Bank due to the impact of COVID-19, but the bank confirmed these would not be treated as an event of default589 - Capital expenditures decreased significantly from INR 899.3 million in FY2019 to INR 437.2 million in FY2020, with further reductions planned for FY2021608 Item 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES This section details Yatra's board of directors and senior management, their compensation, board practices, and beneficial share ownership Directors and Senior Management The company is led by co-founder and CEO Dhruv Shringi, with a senior management team and board of directors comprising experienced professionals - The executive team is led by co-founders Dhruv Shringi (CEO) and Manish Amin (CIO)653654 - The Board of Directors includes experienced professionals such as Sean Aggarwal, Neelam Dhawan, and Sanjay Arora658660661 Compensation Non-executive directors receive an annual base fee of $15,000, while aggregate executive compensation was INR 60.7 million in FY2020, excluding equity awards under the 2006 and 2016 incentive plans - Non-executive directors receive a $15,000 annual fee plus a $10,000 retainer for each committee membership663 - Aggregate compensation for the executive director and senior management in FY2020 was INR 60.7 million, excluding equity compensation665 - The company has two main equity plans: the 2006 India Share Plan and the 2016 Stock Option and Incentive Plan, with 614,418 options and significant RSUs outstanding as of March 31, 2020666677682 - In FY2020, the company deferred the vesting of 643,147 RSUs (granted in FY2017) and 263,115 RSUs (granted in FY2018) until December 31, 2020666671 Board Practices The board of directors consists of five members with staggered three-year terms and three key committees, operating under certain foreign private issuer exemptions - The board is divided into three classes with staggered three-year terms, which can make it more difficult for shareholders to change a majority of the directors at one time698706 - The company has three key board committees: Audit, Compensation, and Nominating and Corporate Governance, with defined responsibilities and independent members705706708 - As a foreign private issuer, Yatra is exempt from certain SEC rules and may follow home country governance practices, having not held an annual general meeting since December 12, 2018714702 Share Ownership This subsection details the beneficial ownership of Yatra's shares as of March 31, 2020, listing major shareholders and management holdings Major Shareholders (Beneficial Ownership > 5%) as of March 31, 2020 | Shareholder Group | Percentage of Outstanding Shares | | :--- | :--- | | Entities Affiliated with Nathan Leight | 15.15% | | Macquarie Group Limited | 12.43% | | Entities Affiliated with Altai Capital Management, LLC | 10.52% | | RCH Ltd. | 7.55% | | Entities Affiliated with Vincent C. Smith | 5.95% | | Entities Affiliated MAK Capital One L.L.C. | 5.89% | | E-18 Limited & Capital18 Fincap Private Limited | 5.38% | | Entities Affiliated with Norwest Venture Partners | 5.16% | - All current directors and executive officers as a group beneficially owned approximately 3.73% of the outstanding shares as of March 31, 2020723 Item 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS This section details the company's major shareholders and outlines significant related party transactions, including a preload agreement with Reliance Retail Ltd. and an Investor Rights Agreement - The company has an Investor Rights Agreement that grants major shareholders, including MIHI LLC and the Terrapin Sponsors, registration rights and the right to nominate directors and appoint board observers734737 - An agreement with Reliance Retail Ltd. involves pre-installing the Yatra mobile application on Reliance Jio LYF smartphones, with consideration to be settled in equity shares of Yatra India732733 - An Exchange and Support Agreement allows holders of Yatra USA Class F common stock to exchange their shares for Yatra Online, Inc. Ordinary Shares until December 16, 2021739 Item 8. FINANCIAL INFORMATION This section refers to the consolidated financial statements in Item 18, notes the absence of material adverse legal proceedings, and states no plans for dividend payments - The company is involved in various tax proceedings in India but does not believe any ongoing legal or arbitration proceedings will have a material adverse effect on its financial position745746 - Yatra does not anticipate paying dividends in the near future, as it plans to retain all future earnings for business operation and expansion747 Item 10. ADDITIONAL INFORMATION This section provides supplementary information on share capital, Indian exchange controls, foreign investment regulations, and U.S. and Indian federal income tax consequences for shareholders - Foreign investment in Indian companies is regulated by FEMA and the FDI policy, which may affect the company's ability to make future investments in India and restricts lending to or borrowing from its Indian subsidiary758 - The company's ability to pay dividends is dependent on receiving dividends from its Indian subsidiary, Yatra India, which is subject to Indian laws and potential dividend distribution taxes760 - For U.S. federal income tax purposes, the company believes it should be treated as a foreign corporation and not a U.S. corporation under Section 7874 of the Code777780 - The company does not expect to be classified as a Passive Foreign Investment Company (PFIC) for the current taxable year or the foreseeable future, but this status is determined annually and cannot be guaranteed795 - Under Indian tax law, non-resident investors may be subject to Indian taxes on capital gains from the sale of Yatra's ordinary shares, as the shares derive their value substantially from assets located in India814815 Item 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is exposed to credit risk from trade receivables, liquidity risk managed by cash reserves, and foreign currency risk from operating transactions, without current hedging agreements - The company is exposed to credit risk from operating activities, primarily trade receivables from customers and suppliers841 - Liquidity risk is managed by maintaining adequate cash reserves and banking facilities, with current cash and operations expected to be sufficient for at least the next 12 months843845 - Foreign currency risk exists due to transactions denominated in currencies other than the functional currencies of its subsidiaries, though the company does not currently use hedging instruments to mitigate this risk846 PART II Item 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS In June 2020, the company completed a follow-on public offering of 14,375,000 ordinary shares at $0.80 per share, generating $10.5 million in net proceeds for general corporate purposes - On June 23-24, 2020, Yatra completed a follow-on public offering of 14,375,000 ordinary shares at $0.80 per share855 Follow-on Offering Details | Metric | Amount | | :--- | :--- | | Shares Sold | 14,375,000 | | Price per Share | $0.80 | | Aggregate Gross Proceeds | $11.4 million | | Net Proceeds | $10.5 million | Item 15. CONTROLS AND PROCEDURES Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of March 31, 2020, with no material changes reported - Management, including the CEO and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective as of March 31, 2020856857 - Based on an assessment using the COSO 2013 framework, management concluded that the company's internal control over financial reporting was effective as of March 31, 2020860861 - As an emerging growth company, Yatra is exempt from the auditor attestation requirements of the Sarbanes-Oxley Act regarding internal control over financial reporting862 PART III Item 18. FINANCIAL STATEMENTS This section contains the audited consolidated financial statements of Yatra Online, Inc. for the fiscal years ended March 31, 2020, 2019, and 2018, prepared in accordance with IFRS - The financial statements were audited by Ernst & Young Associates LLP, who issued an opinion that the statements are fairly presented in conformity with IFRS as issued by the IASB890 - The financial statements cover the three-year period ended March 31, 2020, providing comparative data on the company's performance and financial health890