Details of the initial public offering
Broadcast dates: August 28-30
Issue price: ₹318-334 per share
Issue size: up to Rs 601 crore
Implied market capitalisation: Up to Rs 2,004 crore
Face value: Rs 2
Lot size: 44 shares
Retail Portion: 35% of net issuance
Ecos (India) Mobility and Hospitality, a corporate car rental services provider, plans to raise Rs 601 crore through a promoter offer for sale, which will reduce its stake from 98% to 68%. The company has access to over 12,500 vehicles, ranging from economy cars to luxury cars, but only 6% of the fleet is owned by the company. This asset-light business model supports high profitability. Return on capital (RoE). The growing share in the organised employee transportation services market driven by expansion of global capacity centres (GCCs) augurs well for the company. Considering these factors, investors may consider the IPO.
Business
Founded in 1996, New Delhi-based Ecos Mobility operates in two segments: Employee Transportation Services (ETS), which contributes two-thirds of revenues revenue and the rest is from Chauffeur Car Rentals (CCR). The company offers services in 109 cities in India, though nearly 60% of the revenue comes from four metropolitan cities: Bengaluru, Gurugram, Mumbai and Hyderabad. The company’s clients include InterGlobe AviationHCL Corp, Safexpress, Deloitte, Industrial Bankand HDFC Life InsuranceOver 57% of clients have been working with the company for over five years. The combined market size of ETS and CCR in India is about Rs 1 trillion, with organized players capturing 15% and 22% of the respective markets.
Finance
Revenue grew 94% year-on-year to Rs 554 crore between FY22 and FY24. Net profit rose to Rs 62.5 crore from Rs 9.8 crore while earnings before interest, tax, depreciation and amortization (EBITDA) grew 123% to Rs 89.9 crore during the period, achieving a EBITDA margin of 16.2%. It had a return on equity (RoE) of 70% in FY24.
Risks
The ETS and CCR market is highly competitive and has few barriers to entry, offering little competitive advantage. Ecos Mobility’s business relies on relationships with suppliers that supply vehicles and drivers; any adverse change in these relationships, or the inability to establish new ones, could negatively affect the business.
Valuation
The company is seeking a price-earnings (P/E) multiple of 32 based on FY24 figures. While there are no directly comparable listed players on the main board, Wise Travel and Shree OSFM, listed on the SME platform, are trading at 25-28 times earnings, but with lower ROE.
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