CEO exits, odd pivots, and falling profits: What's happening at EaseMyTrip?

EaseMyTrip emerged as a market darling soon after its March 2021 stock market debut. The online travel company impressed investors with stellar financials—operating margins of over 30 per cent, return on capital employed above 50 per cent (in FY21-23), and a 4x profit growth between FY20 and FY23. The market rewarded this performance handsomely, and the stock soared over 5x from a bonus-adjusted Rs 6 to Rs 34 by November 2022.

But 2024 brought a dramatic plot twist. The stock crashed over 52 per cent from its peak during the year dragged by weakening financials and a series of puzzling decisions that have left investors questioning whether this growth story is running out of fuel. So what went wrong? Let's take a look.

EaseMyTrip plagued by competition

Intense competition in the online travel agency space from major players such as MakeMyTrip, Yatra, and Cleartrip remains fierce. EaseMyTrip initially carved a niche with its low-cost structure and operational efficiency, enabling it to outshine competitors in profit margins. This edge, though, is eroding as rivals ramp up their marketing spending and customer acquisition strategies, squeezing margins across the sector.

EaseMyTrip's operating profit margins have tumbled from a peak of 56 per cent in FY22 to 30 per cent in the twelve months ending September 2024. Similarly, return on capital employed (ROCE) has fallen from over 63 per cent in FY22 to less than 30 per cent in FY24.

The bizarre EV pivot

In September 2024, EaseMyTrip announced its foray into electric bus manufacturing, committing Rs 200 crore over two to three years to build a plant capable of producing 5,000 buses.

While diversification can be a strategic growth driver, this move starkly misaligns with the company's asset-light business model. Management's reluctance to provide details has only deepened scepticism. Without a clear roadmap or tangible synergies with its core business, this move risks becoming a costly distraction.

Insider exits

Concerns about governance and management's commitment have come to the fore with Nishant Pitti stepping down as the company's CEO on January 1, 2025. A day prior to this, he sold 1.4 per cent of his stake, following a larger 14 per cent sale in September. With promoter ownership now below 50 per cent and no clear succession plan, these developments have shaken investor confidence in the company.

Macro worries

Adding to the challenges are global macroeconomic uncertainties, evolving post-pandemic travel habits, and the growing appeal of direct bookings with airlines and hotels. While some competitors are doubling down on loyalty programmes and bundled travel solutions, EaseMyTrip's recent foray into electric buses appears a puzzling departure from industry trends.

Larger players on the sidelines

Institutional ownership in the company remains stagnant at 5 per cent. While retail ownership jumped from 26 per cent to 38 per cent between December 2023 and December 2024, this telling divergence suggests that larger investors might be seeing red flags that retail investors are overlooking.

The road ahead

EaseMyTrip's recent actions have muddied its strategic vision. Promoter stake sales, the CEO's resignation, and a puzzling venture into electric bus manufacturing raise more questions than answers. Meanwhile, its P/E ratio of around 60 offers little consolation.

The company has yet to offer clear guidance on its future strategy or demonstrate how it plans to stabilise its operations and regain investor confidence. For now, investors should adopt a wait-and-watch approach. Let EaseMyTrip navigate this period of turmoil and demonstrate a clear, sustainable strategy before making any investment decisions.

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