ECOS India Mobility & Hospitality IPO Analysis: ECOS (India) Mobility & Hospitality Company is launching an IPO worth ₹601.20 crores, starting on August 28, 2024. The offer will close on August 30, 2024, with shares expected to list on September 4, 2024. This article will review the ECOS India Mobility & Hospitality IPO, examining its strengths and weaknesses. Stay tuned for a detailed analysis of the company.

About ECOS India Mobility & Hospitality

ECOS (India) Mobility & Hospitality, established in 1996, stands as India’s largest chauffeur-driven mobility service provider for corporate clients. Specializing in chauffeured car rentals (CCR) and employee transportation services (ETS), the company caters to Fortune 500 and BSE 500 firms across 109 cities. With a fleet exceeding 12,000 vehicles, ECOS operates on an asset-light model, owning only 5.81% of its fleet.

Focusing primarily on B2B services, ECOS provides CCR for corporate clients, serving employees and guests, while ETS manages home-office-home transport. Additionally, the company offers global car rentals in over 30 countries and leverages technology to seamlessly integrate with customer systems, enhancing efficiency and convenience in corporate travel management.

The company earns revenue from CCR and ETS, with ETS accounting for 54.71% and CCR for 43.29% of total revenue in Fiscal 2024. It boasts a robust customer base, serving more than 1,100 organizations.

Notable clients include Interglobe Aviation (Indigo), HCL Corporation, Deloitte Consulting India, UrbanClap Technologies, HDFC Life Insurance, Walmart Global Tech, VA Tech Wabag, IndusInd Bank, and others.

Industry Overview

The Indian road transport sector has experienced substantial growth, with projections estimating its value to reach $184.7 billion by 2030. This sector encompasses various segments, including the light vehicle mobility market, which is divided into personal and cab services. The cab segment further includes corporate (B2B) and retail (B2C) categories, offering services such as employee transportation and car rentals.

Corporate mobility is expanding as more companies establish themselves and work patterns evolve. This growth is driven by factors such as the shift back to in-office work, an emphasis on employee satisfaction, and an increase in corporate travel. Additionally, the expansion of office spaces in major cities and the rise in airport numbers contribute to the heightened demand for corporate mobility solutions.

The sector is becoming more organized, with companies seeking reliable and accountable service providers. Major players are pursuing pan-India consolidation to enhance their presence. Concurrently, the retail car rental market is on the rise, with expected revenues of $7.5 billion by 2030, indicating a sustained preference for chauffeur-driven services.

Financial Highlights

In FY24, ECOS (India) Mobility & Hospitality reported a significant revenue increase, reaching ₹554.41 crores, up from ₹422.67 crores in FY23, marking a 31.16% YoY growth. The company also saw a notable rise in net profits, which surged by 43.45% to ₹62.53 crores from ₹43.59 crores the previous year.

While operational revenue and other income contributed to the higher net profits, expenses increased in FY24 due to costs related to services, purchased goods, and employee costs. Despite these higher expenses, the company managed to improve profitability.

The earnings per share (EPS) for FY24 stood at ₹10.42, a significant increase from ₹7.27 per share in FY23. This represents a fivefold increase from FY22, substantially enhancing shareholder value.

ECOS India Mobility & Hospitality IPO – Ratio Performance & Segments

Return on Equity (RoE) Performance: In FY24, the Return on Equity (RoE) for the company was 43%, a decline from 47% in FY23, though it marked an improvement from FY22. The decrease in RoE for FY24 can be attributed to higher reserves and slower profit growth relative to these reserves.

Trade Receivables Turnover Ratio: The Trade Receivables Turnover Ratio in FY24 was 8.13, down from 9.75 in FY23 and 7.08 in FY22. This decline indicates a slower collection frequency from credit sales, suggesting that the company is experiencing delays in receiving payments from customers relative to its operational revenue.

Debt to Equity Ratio: ECOS (India) Mobility & Hospitality, operating with an asset-light model, reported a total debt to equity ratio of 0.12 in FY24, a decrease from 0.29 in FY23. This reflects the company’s consistent approach to maintaining low levels of debt over the past three years.

Revenue Breakdown: For FY24, ECOS (India) Mobility & Hospitality generated 43.29% of its revenue from Chauffeured Car Rentals (CCR), 54.71% from Employee Transportation Services (ETS), and 0.20% from other sources. The majority of the revenue is derived from core operational activities.

Return on Investment (RoI): The company’s Return on Investment (RoI) increased to 7% in FY24, up from 4% in FY23. This improvement is attributed to investments in equity instruments and mutual funds, with other income accounting for approximately 2.48% of operational revenue in FY24.

Competitors

ECOS (India) Mobility & Hospitality’s listed peers include Wise Travel India Limited and Shree OSFM E-Mobility Limited. In FY24, ECOS boasts a lower debt-to-equity ratio of 0.12, compared to Wise’s 0.18 and Shree OSFM’s 0.21, indicating a stronger financial stability relative to its peers.

The EBITDA margin for ECOS (India) Mobility & Hospitality stands at 16.23% for FY24, significantly higher than Wise’s 10.45% and Shree OSFM’s 11.24%. This demonstrates ECOS’s superior profitability compared to its peers.

ECOS achieves a return on equity of 42.75%, surpassing Wise’s 15.62% and Shree OSFM’s 15.24% for FY24. Additionally, ECOS shows better PAT margins, with low double-digit figures compared to the mid single-digit margins of its peers.

Overall, ECOS (India) Mobility & Hospitality has excelled in most financial metrics compared to its peers, with comparable revenue sizes to Wise, highlighting its strong performance and competitive edge in the industry.

Strengths

• Business Presence: India’s largest and most profitable chauffeur-driven mobility provider, serving Fortune 500 and BSE 500 companies. Over 25 years in business.
• Asset-Light Model: Operates in 109 cities with a fleet of over 12,000 vehicles, owning only 5.81% of the fleet. This model ensures high asset utilization and effective debt management.
• Customer Loyalty: Long-term relationships with 42 Fortune 500 and 60 BSE 500 companies in India. Many clients have been with the company for over a decade.
• Technology Efficiency: Utilizes custom booking tools, mobile apps for chauffeurs and customers, and a central transport management system. In FY24, 75% of bookings were via the driver app, up from 37% in FY23.
• Financial Performance: Consistent growth with revenue increasing from ₹147.34 crore in FY22 to ₹554.41 crore in FY24. Strong balance sheet and profitability.

Weaknesses

• Higher Service Cost: Service costs for vehicle maintenance increased from 70% of total expenses in FY22 to 80% in FY24. Rising service costs could impact long-term margins.
• Vendor Arrangements: The company relies heavily on vendors for vehicles and chauffeurs, with 94.19% of the fleet sourced from vendors in FY24. Changes or issues with vendors could affect operations.
• Reliant on Major Customers: The top 25 customers contributed 53.42% of total revenue in FY24. Losing these key customers or experiencing payment delays could impact financial performance.
• Low Entry Barrier: Operating in a competitive industry with low entry barriers means competitors might lower prices, potentially forcing the company to reduce rates and affecting revenue and profitability.
• Fleet Upgrade: Fleet expansion and upgrades are affected by vehicle prices. Higher costs could increase operating and depreciation expenses. In FY24, 5.04% of total expenses were spent on new vehicle procurement.

GMP

As of August 26, 2024, ECOS (India) Mobility & Hospitality Ltd shares were trading at a 42.22% premium in the grey market. The shares were priced at ₹475, which is ₹141 above the cap price of ₹334.

Key IPO Information

Particulars	Details
IPO Size	Rs. 601.20 Cr
Fresh Issue	–
Offer for Sale (OFS)	Rs. 601.20 Cr
Opening date	28 August 2024
Closing date	30 August 2024
Face value	Rs. 2
Price band	Rs. 318 – Rs. 334
Lot size	44 Shares
Minimum Lot Size	1 Lot (44 Shares)
Maximum Lot Size	13 Lots (572 Shares)
Listing date	4 September 2024

Promoters: Rajesh Loomba, Aditya Loomba, Nidhi Seth, Rajesh Loomba Family Trust and Aditya Loomba Family Trust.

Book Running Lead Manager: Equirus Capital Private Limited and IIFL Securities Limited.

Registrar to the Offer: Link Intime India Private Limited.

Conclusion

ECOS (India) Mobility & Hospitality Limited has demonstrated strong performance from FY22 to FY23, continuing to grow by around 30% in FY24. The company has seen improvements in net profits and operational revenue. However, there is a need for improvement in trade receivables to strengthen financial stability over time.

The surge in demand for transportation and private rentals, driven by an increasing preference for luxury among individuals and businesses, has been significant. This business model primarily serves high-net-worth individuals and large corporations, where exceptional service quality is crucial for customer retention.

In recent years, ECOS (India) Mobility & Hospitality has projected robust growth. Its focus on high-quality services has helped it navigate competitive pressures effectively, ensuring sustained success and a solid market position.