Is Ebix Inc a Phygital E-Commerce Contender or Pretender?

Key Points

• Ebix is a leading supplier of digital on-demand software and e-commerce services to the insurance, e-learning, financial and healthcare industries.
• It uses a phygital (physical and digital) strategy of more than 320K physical distribution outlets in ASEAN countries.
• It develops and operates digital exchanges for the insurance, financial and healthcare industries.
• Its EbixCash India business is the culmination of more than 25 acquisitions to grow a Frankenstein-like Indian fintech.
• Hindenburg published a short-seller report about the company's EbixCash business claiming fake revenues and accounting red flags.
• Ebix plans to become debt-free in 2023 by spinning off its EbixCash IPO and several other carve-out alternatives.
• EBIX trades at 14.5X forward earnings with a large 21.5% short interest.

Global e-commerce and Software-as-a-Service (SaaS) provider Ebix Inc. NASDAQ: EBIX is a jack-of-all-trades fintech solutions provider to the insurance, travel, healthcare and e-learning industries. The company may be under the radar, but it's not new. It's been a listed public company for over 30 years, originally called Delphi Information Systems.

Its main business is providing insurance exchange solutions and services in the U.S. and operating its EbixCash segment out of India.

EbixCash uses a physical and digital strategy it calls phygital, comprised of physical distribution outlets in Southeast Asian regions with a digital platform. It provides airport foreign exchange services, digital payment processing, and travel services with over 500,000 agents. The company plans to spin off EbixCash in a $1 billion IPO in India but awaits regulatory approval.

Hindenburg Controversy

Hindenburg Research pointed out that EbixCash has had seven auditors resign, publishing a short-seller report in June 2022 attacking the company. The bear raid saw EBIX stock collapse from $31.24 to $12.42 in two weeks. Ebix rebutted Hindenburg's claims in a June 16, 2022 press release. Ebix obtained an Indian court order blocking the publication of the Hindenburg short-seller report in India. Alphabet Inc. NASDAQ: GOOGL, Google search engine, and Twitter were ordered by the Indian courts to remove URLs linking to the report from the Indian domain.

Insurance Technology

Ebix generates most of its revenues from its insurance technology business which includes operating online insurance exchanges and software solutions, including enterprise management, CRM systems and claims management systems. Major banks and insurance companies are customers of Ebix exchanges and consulting services. Its SaaS platforms help insurers and financial institutions sell insurance and financial products online to consumers.

EbixCash: The Frankenstein Fintech of India

EbixCash is an Indian fintech subsidiary that provides payment, peer-to-peer, processing and online and offline payment solutions, including prepaid cards. Its technology services division provides lending, wealth management, and travel technology in India and internationally throughout Europe, ASEAN countries and the Middle East.

If the many businesses seem unrelated and downright convoluted, it’s because of the 25 acquisitions of Indian businesses acquired through debt financing, creating a Frankenstein-like fintech.

Its services include prepaid cards, international remittances, travel services, corporate and incentive solutions, foreign exchange, and mobile and digital payments.

The EbixCash segment has had 32% YoY revenue growth, excluding prepaid cards. It recently signed a cash management deal to collect 12 million monthly power bills from customers in north India. The company plans to spin off its EbixCash division in an IPO to help trim its debt pre-pandemic 2019.

Still Churning Out Profits

On May 10, 2023,  Ebix reported its Q1 2023 results for the quarter ending March 2023. The company reported EPS of $0.23, beating a single analyst estimate of $0.19 by $0.04. Revenues declined 14% YoY to $242.7 million versus the $227 million analyst estimate.

Debt-Free Dreams

CEO Robin Raina expects to launch the EbixCash IPO in the next several months, with a possible listing in Q3 2023. He also exposed the goal of being a debt-free company by the end of 2023. The company had accumulated over $600 million in debt financing numerous acquisitions.

He noted that Ebix had been debt-free twice before during his more than two-decade tenure at the company. He stated, “Let me tell you that Ebix is again fully committed to the aspirational idea of a debt-free company in 2023. We have various alternate ways to get there, including the EbixCash IPO, a product asset carve-out or/and a few other alternatives.

We have moved forward on all these alternate paths with the goal of not having a debt overhang beyond 2023.”

Ebix analyst ratings and price targets are at MarketBeat.

Weekly Descending Triangle Breakout

EBIX formed a bearish weekly descending triangle after peaking at $39.14 in March 2022. The downtrend continued to make lower lows on bounce attempts forming a descending trendline.

The flat-bottom low of $12.42 resulted from the Hindenburg short-seller report formed the lower horizontal trendline in June 2022. Each break attempt was rejected under the descending triangle, while the lower flat trendline saved the breakdown attempts at $12.42.

The last breakdown attempt occurred in April 2023 as shares fell to a low of $11.75 but rallied like a spring to establish the weekly market structure low (MSL) at $19.33 powered by the relative strength index (RSI) bounce up near the 20-band. EBIX finally broke through the descending triangle in May 2023, rallying $28.77 in June 2023 as shares started to consolidate as the weekly RSI near the 70-band. Pullback support levels are $21.64, $19.33 weekly MSL trigger, $17.39 and $15.25.