Ecos (India) Mobility & Hospitality Ltd. (Subscribe)

Highlights

Ecos (India) Mobility & Hospitality Limited (Eco Mobility), incorporated in 1996, is primarily engaged in the business of providing chauffeured car rentals (CCR) and employee transportation services (ETS) and has been providing these services to corporate customers, including Fortune 500 companies in India, for more than 25 years.

They operate a fleet of more than 12,000 economy to luxury cars, mini vans and luxury coaches. They also provide specialty vehicles such as luggage vans, limousines, vintage cars and vehicles for accessible transportation for people with disabilities.

Their CCR segment is a B2B2C business, where their customers are corporate companies, and the end consumer is an employee, client, guest or visitor of these corporate companies. Through their ETS segment, they offer customers with solutions to manage their employee home-office-home ground transportation.

In FY24, through their CCR and ETS segments, they have completed more than 3,100,000 trips, averaging at more than 8,400 trips in a day. They also address the global car rental requirements of corporate customers, through a global network of vendors with their capability of providing CCR services in over 30 countries. They also provide cars of self-drive basis in the cities of Delhi, Gurugram, Mumbai and Bengaluru. They have also provided self-drive cars outside India through vendors.

As of FY24, they have a pan-India presence in 109 cities through their own vehicles and vendors, spread across 21 states and 4 union territories in India, which underscores their deep-rooted and extensive footprint and demonstrates penetration into diverse regions across India. Their operations in 97 cities in India are conducted through vendors.

Out of the total proceeds of Rs. 6,012 mn, entire proceeds would go towards existing selling shareholders of the company and company will not receive any proceeds.

Key Highlights

• The market for ETS in India is Rs. 503.5 bn (USD 6.1 bn) in CY23 and It is expected to grow at a CAGR of 11.8 pct to reach Rs. 1097.6 bn (USD 13.2 bn) sales in CY2030. The corporate car rental market, estimated at Rs. 392.4 bn (USD 4.7 bn) in CY23 and it is estimated to register CAGR of 9.3 pct to reach annual sales of Rs. 731.8 bn (USD 8.8 bn) by CY2030. As, market growth in the ETS and CCR segments is fuelled by transition from remote work to in-office work, rise in corporate air travel, expansion of office space and expansion of tier-II and tier-III cities, ECOS Mobility is poised to benefit from such sectoral tailwinds. 
• The company has increased their focus on premium vehicles due to increasing customer preference for premium vehicles and the number of CCR bookings for premium vehicles in their fleet has increased from 60,979 bookings, constituting 28.53 pct of their CCR booking is FY22 to 168,261 bookings constituents 35.46 pct of their booking in FY24.
• Eco Mobility operate their fleet of vehicles on an asset light model, where they strive to keep the number of the vehicles which they own in fleet significantly lower than the vehicles which are sourced from their vendors. As of FY24, 94.19 pct of vehicles operated through vendors and 5.81 pct vehicle hold by the company.
• Company’s key strategies include (i) Expanding their presence in Tier-II and Tier-III cities in India and increasing their penetration in cities with existing operations (ii) Acquisition of new customers and increasing revenue from existing customers and expanding sales team (iii) Continue to focus on technology to ensure operational excellence (iv) Continue focus on building their brand through brand building strategies and focus on operational excellence. (v) Expanding their geographical footprint globally and (vi) Leverage their position in the chauffeur driven mobility provider industry to capitalize on the growth in the industry which will drive their next phase of growth.
• The company also evaluate increasing the number of offices in cities where the demand for their ETS and CCR services is increasing to cater to customer requirements. Tier-I cities, such as Mumbai and Bengaluru, where they intend to increase their market penetration, by increasing the number of offices, are major economic hubs hosting a high concentration of businesses.
• Sales of the company has grown by ~94 pct CAGR During FY22-24 and EBITDA and profit grew ~123 pct CAGR and ~151.26 pct CAGR over same period. Company reported sales of Rs. 5,544 mn in FY24 which increased by 31.17 pct YoY, while EBITDA grew 29.2 pct YoY to Rs. 900 mn as EBITDA margin slightly fell from 16.50 pct in FY23 to 16.23 pct in FY24. As of FY24 the company reported profit of Rs. 625 mn which grew 43.45 pct YoY.

Key Risk

• Any downturn in Global Capability Centers (GCC) would create an adverse impact on their revenue from customers in the ETS business segments.
• Intense competition in the chauffeur driven mobility provider industry could affect their pricing, which could consequently decrease sales and profitability.
• Chauffeur shortages and increases in chauffeur compensation could adversely affect the company’s profitability and ability to maintain or grow their business.

Financial Performance and KPI’s

Peer Comparison Based on FY24

Valuation

ECOS (India) Mobility & Hospitality Limited is the largest and most profitable chauffeur-driven mobility provider to corporates in India, in terms of sales and profit for FY23. The Indian transportation landscape is experiencing significant shifts, with the ETS and CCR markets showcasing distinct growth trajectories. Indian companies, especially those with organized structures and the necessary expertise, have a significant opportunity to quickly grab this market. At the upper end of the price band of Rs. 334 the issue is priced at a PE of ~32.1x its FY24 earnings. The issue looks fully priced. However, one can subscribe for longer-term perspective.

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