In an interview with Robin Raina, Chairman & CEO, Ebix Inc., talks about building an airport like enterprise exchange for India consolidating insurance, healthcare, remittances, travel and host of other businesses
The blistering pace with which this company made an acquisition in the last five months, created a lot of stir in the market with competitors reweighing their strategies. Robin Raina, Chairman & CEO, Ebix Inc., bought payments firm ItzCash in May 2017 for around $120 million, marking the beginning of its big bold India plan. Next came travel portal Via, money transfer business of Paul Merchants and Your First Money Express.
Setting aside an additional $200 million for future acquisitions in India, this US-based software and service company is in no mood to slow down to cash on India’s digital movement.
Aiming to build an ‘Airport’ like the model and be India’s single financial exchange for insurance, remittances, healthcare, travel and host of other services, Raina speaks with BW Businessworld about his ‘India Blueprint’.
My vision is to set-up an infrastructure exchange in India like an ‘airport’. When you want to fly somewhere, you choose your flight, not your airport. The airport is the infrastructure and that’s how Ebix wants to be. We create infrastructure exchanges or aggregations and then become non-aligned to let transactions happen.
Ultimately we want to converge 3 channels- Insurance, finance and healthcare and put all three together. That is what these acquisitions are all about. We want to consolidate the market and streamline the data for it to flow seamlessly and cross-functionally.
India does have a unique opportunity where nobody has thought through this in an enterprise manner. If you see the Indian market, people have either focussed on payment solutions, credit cards, insurances or wallets. There are desperate providers trying to cater to 5 different solutions in 45 different ways. Ultimately there is one consumer who wants simplification and the best price. Ebix, therefore, wants to build a handshake between the consumer and all the back-end activities- B2C and B2B process.
I see travel as a subset of financial exchanges and hence we did not separate it out. Travel is a very key part of a financial exchange. Take India’s metrics, for instance, last year almost 600 million people travelled from one place to another which is twice the population of USA. When people travel, they spend money on remittances, insurance, forex and others. Therefore, travel becomes an integral part of money generation and financial packages.
Buying Via.com was a key piece of this puzzle.
In order to evolve our financial exchange strategy, we needed a base foundation in India. We could have either built it ourselves and spend a lot of time or buy something already doing well. When we started exploring the market, we could not find a single payment solution player who was actually doing business with ‘common sense’.
EbixCash had their basics right and were the only ones not losing money. They had the right vision of combining physical outlets with digitisation- ‘Phygital’. We realised that unlike other markets, the fight is India is going to be in the last mile. Whosoever has the last mile and largest aggregation with a recurring cash generating model wins the battle. EbixCash had the potential and we decided to buy it and built it further with our vision on top.
Let’s take a step back and walk through the very concept of e-wallets. Ebixcash also has its own mobile wallet, but at the same time is not big into giving a strong push to it.
As the economy evolves in India, everyone will have a debit or a credit card issued by the bank. What would trigger you to use a mobile wallet over a card? People are using mobile wallets today because they are given some value. But if the value was given is unsustainable, it is bad business.
If you look at the ‘so-called’ big names in the industry, they are giving value in the form of ‘cashback’ to retain the customer. How long will that sustain? Deep pockets and big investors will help you survive for only for 3-4 years, but post that the investors will become restless. When Microsoft bought Nokia, it had deep pockets too. But it soon realised the unsustainable economic model of Nokia and pulled out. That is how I look at mobile wallets in India who are burning up all their cash.
It is good to be a mobile wallet company, provided it is of incidental use in your business and not your key function. The key tool needs to be something else- travel, lending, insurance or others.
The jury is not out on it. The government of India has come out with its own UPI, Google Tez is now coming and so on. These are all good signs for the country. At the same time, a lot of this has happened and it is not something that has taken the market by storm, anywhere in the world. I am a bit sceptic on the mobile wallet market. Companies will need to diversify, as it does not make business sense to base your strategy around just e-wallets. The top e-wallets are now rethinking their strategies and diversifying. It is a good sign. If they don’t, it will lead to the law of diminishing returns for them sooner or later. You could create hype in the market but the cash burn rate will kill the company.
We are continuously going in different directions. We recently entered into a joint venture with BSE for insurances. We will invest in that strongly, brand and promote it aggressively. Beyond that, lending is a market for us. Further, you could see us buying lending exchanges and P2C insurance exchanges. You could also see us going into back-end services and buy strategic consulting companies who support banks and insurance companies.
We are air marking $ 200 million for India out of which we have already spent $ 130 million. However, don’t read too much into this $ 200 million number as we will scale up. We are not buying loss-making companies in India but cash-generating ones. When you buy such businesses, you could further buy more companies. We have an appetite, scalability and balance sheet bigger than $ 200 million. Ebix runs with more than 40% cash EBITDA. By the end of December this year, our employee count would be close to 7000 in India, which means we are investing rigorously and wanting to grow organically
There are obviously regulatory environment challenges. But I personally do not buy this argument. My advice to entrepreneurs would be not to base their business models around positive moves like demonetisation. What if the government reverses its path? This is bad business again.
Look at the insurance sector in India. I personally feel that it is a mistake not to allow foreign companies to have more than 50% position in India. Apart from this, we could improve the speed of official approvals. I give Mr Modi a lot of credit for doing a much better job than what was happening in the past. I will focus on the positives, rather than worrying about the negatives.