Starting as a B2B business was the best decision we made: Prashant Pitti, Founder of EaseMyTrip

When the pandemic locked people inside, travel was one of the spaces that took a heavy hit. Even though online travel agencies (OTAs) struggled to stay afloat, there was an ‘outsider’ who not only managed to transform into a unicorn this year, but also went public and raised Rs 510 crore through to an IPO. But it has taken the platform 13 years since its inception in 2008 to get to where it is today. The co-founder of EaseMyTrip, Prashant Pitti, explains these 13 years, why they chose to remain bootstrap and their future projects.

Corrected excerpts from the interview.

Congratulations on your recent unicorn tag. At a time when start-ups turn into unicorns within 5-6 years, why do you think it took so long to get there?

Slowly and steadily winning the race, that’s the story of EaseMyTrip. The biggest difference between our tag and theirs is that we achieved it by staying profitable for the entire 13 years without ever collecting any money and collected Rs 260 crore running a business.

Businesses can turn into unicorns, but 99% of them are unprofitable. They have a path to profitability five or six years later. The internet has seen enough business valuation cycles corrected. As they say, the main thing is vanity, the main thing is reason and money is king. Ultimately, it’s the cash flow that matters. Our company has a very important cash flow. We are built to exist, to support and to prosper, and to be there for the long haul. We are so resilient that even in the Covid-19 year of FY21, which was the litmus test for any travel agency, we made a profit of Rs 88 crore before tax.

Today we do about 17,000 to 18,000 transactions per day, but we will break even at 1,500 transactions. This is the kind of efficiency and lean cost structure that we have built and no competition can take that away from us. This is the hard work of the past 13 years and we are sure to exist for the next 50 years. Whether the unicorns or the unicorns, which have sprouted up like mushrooms, can say that for themselves, I’m not sure.

You have not opted for any external funding and have chosen to remain bootstrap over the years. Why was that?

Honestly, I also think VC and PE money is good for solving your startup problems and definitely helping you in the beginning. But, people have started to take this money as part of their balance sheet and income statement and not as a liability or a loan. They think it’s okay to keep losing because they’ll get that money anyway. Raising capital has been so cheap over the past decade.

When we started EaseMyTrip, we were purely a B2B business helping travel agents sell better plane tickets and we stayed that way for the first three years. We approached three or four VCs at a time when there weren’t that many. They were right not to invest at this time and their thought process – eventually everyone will book plane tickets or vacations on websites on their own. Why should we invest in a B2B business? We weren’t able to raise funds at that time, even after telling them we wouldn’t always be a B2B business. Their argument was that for B2C Yatra, MakeMyTrip and Ibibo already exist when we said we will become a B2C company in three years. They didn’t want to invest in either our B2B business or our B2C business. This is how the chapter ended.

Then we didn’t look back and the idea of ​​approaching VCs didn’t even come to us. Many of those who rejected us came back in 2014 seeing us rise through the ranks. There have been many times we have had the case but left it on the table. We just couldn’t fathom the idea of ​​taking someone’s money, burning it on marketing, rebates, and making the same mistakes our competition did. We were happy to take that money and put it in FD because our business was growing and growing profitably. But that’s not what they wanted. Even in the first year, 2008, our growth was profitable. There was no real need to raise money

Since your model isn’t much different from other players in space, what has your USP been like over the years?

We are currently the second largest travel portal and we have done so by outperforming various heavily funded start-ups doing similar things.

Looking back, starting as a B2B business was the best decision we made. We have been able to develop our technology, lean operations and relationships with airlines without competing with others. We did not go into B2C because the big players would have eaten us alive for the first three years.

In the B2B business, if we got a 7-8% margin from the airlines, we would have to give a 6-7% discount back to the travel agent to use us. We only kept 1-1.5% commission to ourselves, which forced us to become extremely light and efficient using as much technology as possible.

When we became a B2C company three years after its inception, our operational structure did not change. But now we didn’t have to pass that 7% discount on to anyone. This is the money we have to keep. The business was built for 1% but we started to gain 8% and that’s how we became profitable.

Another thing is that while our competitors were spending Rs 1,500 crore to Rs 2,000 crore per year on marketing, we were spending exactly 0.

You also made it public this year. How did this experience go?

It was surreal. We didn’t know what we were getting into, especially since we were one of the first internet companies to be listed. After us, the floodgates opened with Zomato, Nykaa and CarTrade. EaseMyTrip was the first to do an IPO in 2021. I think we can be proud of the fact that maybe we were one of the inspiration for people to get listed in India. Previously, internet companies thought of being listed only on the NASDAQ. Our competitors, MakeMyTrip and Yatra, are listed there. We chose to do it differently by going public in India because we knew that by doing so we might get a lower valuation than the NASDAQ, but we will surely get a lot of branding and marketing. This is exactly what happened. We see our value increase tremendously by being listed in India.

Any specific future projects after the IPO?

We are looking to grow and start serving people in other parts of the world. The business process – cost structure and lean technology – will remain the same and operations will take place outside of India itself. Currently, we are reviewing six locations: US, UK, Philippines, Dubai, Singapore, and Thailand.

You claim you don’t charge any convenience fees, but consumers pay one if they use a discount coupon on your website. Why is it so?

In 2011, on the first day of starting our B2C operation itself, we decided not to charge the convenience fees. Why should I charge the consumer extra? I didn’t need it. Everyone was charging consumers extra, even then. This is the feeling consumers get when, on the last step (of the reservation), prices change. People have the right to feel violated.

From 2011 to date, we have given consumers the option to waive convenience fees. We have grown mainly through evangelism through the first users who came to see us and were delighted.

Until 2016, we didn’t charge convenience fees even on promo codes, but our consumers started to complain that our offers weren’t that great. For example, if our competitors offered Rs 1000 off, they would charge Rs 300 as a convenience fee and effectively only give Rs 700 off. While the competition would offer a coupon of Rs 1000, we would run Rs 700. For consumers it is the same but at first glance they would say the offers on our site weren’t great.

That’s when we decided to keep an apple-to-apple comparison and started offering Rs 1000 off. If people were only relying on the catchy numbers, we also decided to charge a convenience fee to equalize the situation.

Your profits have doubled from Rs 33 crore in FY19-20 to Rs 61.4 crore in FY20-21, despite your gross booking income falling by almost 50% to Rs 2,128 crore. Even in the fourth quarter of fiscal year 21, you posted a net profit of Rs 30.5 crore compared to a profit of Rs 3.6 crore in the previous fiscal year. How did you manage to reach these figures in the midst of a raging pandemic?

There were two reasons. First, we have negotiated better commissions with our suppliers — airlines, hotels and other parties. Our gross catch rate was 7.8% in FY20, which increased to 10.7% in FY21.

The other thing is that we are lowering our heads in the first half of the pandemic to make the platform more efficient. We were able to reduce our number of employees in the call center service from 200 to 110, which is there even now, as we hit the pre-Covid numbers.

We reduced the dependency of our employees by integrating WhatsApp into our system in April 2020. Instead of calling, customers could now WhatsApp us and our agents would answer.

Our GMV went from Rs 4,200 crore to Rs 2,100 crore. Total activity has halved this year. If the pandemic had not happened, we would have become a Rs 6,000 crore business. However, our margins have increased. Our cost has only come down thanks to our measures. Thus, the EBITDA margin, which was around 1.7%, became 3.7%.

Why do you always call yourself an outsider? Do you think the label remains?

We sure are, right? People didn’t expect us to perform as well as we do. I’m sure our competition would have taken all of this lightly knowing that we never raised any money. “Haan, kuch kar rahe honge. (Yes, they have to do something) ”must have been their thought.

I still think we are an outsider. Even now, when we are the second player and working to be the biggest.