ixigo digs deeper into India’s NBU, Yanolja fans out across the world
IF a collaboration announcement is made between ixigo and Yanolja, just remember you heard it first at the WiT Travel Roadshow Episode 6, where the CEOs of the Indian and South Korean companies joined WiT founder Yeoh Siew Hoon to talk about their recent fund-raising successes, and what’s changed since then.
On top of potentially breaking news at the roadshow – Yanolja has an Indian footprint through lodgings management platform eZee Technosys and who knows what collaboration might transpire, the two co-founders have certainly been busy. While travel and business ground to a standstill elsewhere, ixigo and Yanolja seem to have not just been weathering the storm, but flourishing in the rain.
Yanolja posted a 16.1 billion won profit despite the pandemic in 2020, and in July this year received $1.7 billion in funding from Softbank’s Vision Fund II, ahead of a likely IPO.
Ixigo, for its part, raised $53 million from investors led by Gamnet, an investment firm managed by Singapore’s sovereign wealth fund GIC Private Limited, and filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India for a $215 million IPO.
Of course, we inhabit strange times, which call for strange celebratory rituals, and Yanolja’s Jongyoon Kim tells us that due to the social distancing policies, which were in place in Korea, everyone was working from home and there was no way to celebrate in person. So, he says, he had a drink on his own, and then got back on another conference call.
CEO of ixigo Aloke Bajpai hasn’t celebrated yet, seeing the funds as a “huge sense of responsibility and trust from new investors.” He says that the celebration can come when they are able to “solve the travel problems of the Indian travellers that we’ve been catering to.”
And it’s not just traveller’s problems that Bajpai wants to solve. Eschewing other exchanges, ixigo will list in India, citing the depth and maturity that the Indian stock market has gained in the last decade, but also revealing some local loyalties as he observes “we were incorporated in India, we’ve always targeted Indian travellers … I think it would just be great if some of our users and customers can get to be a part of our growth.”
Given the Korean Exchange’s (KRX) March 2021 easing of listing requirements so as to prevent another Coupang episode (the e-commerce giant went public on the NYSE, raising more than $4.6 billion), is it conceivable that Yanolja will also list domestically?
While Kim could not comment on this in particular he did share that he hopes their success will inspire other companies, saying “Yanolja is moving to reinforce for continuous growth … we’ve had a very difficult time because of Covid-19, so (having) high growth and profitability and big funding this is hope and good momentum for the other travel companies.”
On IPOs, Kim stressed that it was important not to view that as the end-goal, because it is “just the method of the funding, that’s it” – a sentiment that echoes Oliver Rippel’s comments on SPACs from Episode 2 (see article). And indeed, funding via whichever vehicle is just a means to an end.
The real questions of business profitability and sustainability aren’t answered by how much firms raise, but what they do with the funds.
One of the issues that companies deal with on that front is whether to diversify or specialise – never an easy question to answer, especially not for ixigo and Yanolja, flush with funds from these latest rounds.
Bajpai acknowledges the need to navigate this tension, saying “it’s very hard to be a horizontal player and be good at everything,” and yet, he admits it was diversifying into the train and bus business which helped smooth over some of the rougher patches of the pandemic.
He sums it up, saying “I think it’s important to diversify and not have all your eggs in one basket, but then you need to have one thing you’re known for in the market, and that needs to be your prime focus day in and day out.”
For Kim, mergers and acquisitions are a good way to speed up diversification, in particular via the establishing of Yanolja as a superapp. He explains, “with the app business, we need to focus on the average revenue per paying user to be profitable … (so a superapp is a) good solution to diversify and monestise our own traffic to save our costs and increase our revenue.”
Partnerships are also a crucial part of the strategy for Yanolja to become what Kim calls a “next level platform.” Citing Amazon, he believes their success comes in part from the “end-to-end data flow across the value chain between supplier and consumer.”
To arrive at a similar level of integration in a market as fragmented as global travel required Yanolja to develop a cloud-based AI-driven inventory distribution system, which could easily integrate with hotels and travel related suppliers, and also required “many partners to integrate B2C and B2B and online/offline.”
This is the strategy it has pursued for the last six years, and will continue to pursue as Yanolja globalises, Kim tells us, calling it “copying the Yanolja success story and formula, to expand into many countries with our partners through acquisition or investment.” For now, expansion plans are focused on India, Africa and South-east Asia.
For Bajpai, “building the leading travel company in India will involve going to the smallest of towns and being relevant for travel there,” to that end, they are evaluating and will continue to evaluate potential acquisitions that “focus on the opportunity beyond the tier one cities, and beyond flights and hotels,” in the quest for the Next Billion Users.
Even before there was a name for them, says Bajpai, that market segment had been a focus for the firm. About 92.6% of ixigo’s train transactions today have a departure or arrival from a Tier 2, 3, or 4 city rather than a Tier 1 – Tier 1 city, a testament to the years spent building a presence in the market.
And Bajpai intends to continue pursuing opportunities in that market because, as he tells us, “As entrepreneurs, we are always excited when we go after unchartered territory, because there’s no playbook. We’re probably inventing the playbook there right now.”
Apart from pursuit of the NBUs, Bajpai says UPI (Unified Payment Interface) is the thing to watch in India. Where previously the user base existed, transactions had just never taken off, but now, post Covid, he thinks is a “seminal moment for the country”, with 3 billion transactions on UPI (representing almost $80 billion worth of payments and GMV) taking place last month.
For his part, Kim thinks automation and personalisation are the most exciting things happening in hospitality tech because of the possibilities they represent in automating supplier-consumer matching as well as boosting ESG compliance.
For the final question of the session, we asked Bajpai and Kim what they would be doing after their IPO launch and filing respectively. On that front their answers were unanimous – sleep!
And to that we say, go ahead gentlemen, it sounds like you’ve earned it.
• Featured image credit: Syahrir maulana/Getty Images
