In today’s Finshots, we take you through the meteoric rise and fall of the Ebix group.

The Story

Ebix just filed for bankruptcy in the US. Meanwhile, the same company has SEBI’s approval for an IPO in India!

Huh? What on earth is going on???

Well, let’s start from the top.

In 1997, a young Robin Raina left India to join a NASDAQ-listed US company called Delphi. It was a firm that made software for other companies. Primarily for insurance companies. But Delphi was floundering and hadn’t made profits for 23 long years. Now we don’t know what transpired, but, by 1999, Robin Raina was made CEO at the age of 32. The company turned things around. It reported a profit. The stock doubled within 6 months. And all the credit went to Raina.

And then began his next step for domination. He renamed Delphi to Ebix. And decided to cut costs aggressively. He outsourced the company’s operations to India to pad up the business even more.

Everyone believed Robin Raina had the magic touch and for the 10 years or so, it was all smooth sailing for the company.

But then the decade flipped and Ebix’s problems began.

And it was a single article on Seeking Alpha that stirred the pot. It called Ebix a ‘House of Cards’. It claimed that Ebix was acquiring companies randomly without any real playbook. That its revenues were propped up just by the revenues of companies it acquired. And it said:

The EBIX story also comes with multiple auditor resignations, governance abuses, misrepresented organic growth, questionable cash flow and a contentious CEO.

Yeah, it painted Ebix in quite a poor light.

And guess what happened next?

Well, Ebix was just about to sign on the dotted line to be acquired by an affiliate of Goldman Sachs in 2013. But the US government launched an inquiry into financial misconduct. And the deal fell through.

Now you’d think that might’ve been the end of Ebix. But no. Robin Raina continued to acquire companies to diversify its business, the share price zoomed, and the magic touch remained intact.

And when 2017 rolled around, Ebix was riding high on its second revival.

It got even more aggressive. It decided that running an offshore business in India wasn’t enough. It wanted a bigger piece of the growing market. So, it made its first big acquisition — it bought a prepaid card company (for gift cards and stuff) called ItzCash. It had 75 million customers and for Ebix, it meant that it could hit the ground running. It wouldn’t have to build a brand and customer base from scratch. So it quickly took over ItzCash and renamed it to EbixCash.

And Ebix followed this playbook over the next few years in India. It bought financial service companies that handled forex remittances, made forays into edtech, and even bought travel companies.

Just look at this excerpt from 2017 in Forbes.

…his [Robin Raina’s] mobile buzzed. “Paytm is in talks to buy,” read a message from one of his friends in India.

Raina could not afford to let go any interesting buyout opportunity in India. He called up [Vani] Kola — the managing director at Kalaari Capital was one of the backers of Via — at 3.30 am US time.

The next day, Raina made an offer. “If you like it, I will close the deal in 30 days,” he underlined. On the last day of the deadline in October, Ebix announced that it had bought Via for $75 million.

And it acquired nearly 30 companies in India in this manner.

But the ghosts of 2011 were lurking in the shadows too. One after another, people continued to question the company.

For one, Ebix’s auditor resigned in 2021. They didn’t see eye-to-eye with the Ebix management on how to account for this gift card business revenue.

Then, hedge fund Safkhet Capital — which laid bare problems at Wirecard in Germany — said that Ebix’s accounting around its prepaid card business was misleading. Safkhet’s problem was that Ebix reported the money booked on its cards as revenue. Even though the actual amount that came into its coffers was just 1% of that. And it even complained to the US authorities saying that “even Wirecard had more conservative accounting for transactions than Ebix.”

The end result of all this?

Investors rushed for the exit. The share price of NASDAQ-listed Ebix collapsed by a whopping 75% between 2018 and 2022!!!

Meanwhile, the acquisition-binge turned out to be quite problematic too. And that’s because it was funded by debt. The loans kept racking up — to over $600 million. On the other hand, its cash balance was a measly $60 million.

Seems like the 2011 article in Seeking Alpha article was quite prescient in its observations, no?

So the question was — how would Ebix climb out of this mess?

Well at one point, it wanted to tap into the Indian subsidiary EbixCash. It wanted to launch a massive IPO and felt that it would be able to get $350 million and repay the dues.

But the IPO announcements were like the boy who cried wolf. Ebix talked about it since 2019; it finally got SEBI’s go-ahead in April this year; and there’s still no sign of it.

Why’s that the case, you ask?

This is speculation but it could be a couple of things.

For starters, when a company launches an IPO, it needs the support of big institutions. The folks like mutual funds who’ll come in and play an anchor role. Because when the biggies come in, it’s a confidence booster for others. But apparently, fund managers in India don’t want to get anywhere close to an Ebix IPO. They don’t want to meet the company’s CEO.


The other problem could be that SEBI doesn’t seem to be too happy about giving the green signal. It’s not directly annoyed with EbixCash but with the bankers involved in preparing the documents for the IPO. It looks like they failed to mention some of the naughty stuff the company got up to.

So yeah, without the IPO’s proceeds from the Indian subsidiary, and no other cash coming in, Ebix had no choice but to declare bankruptcy.

But does that mean EbixCash is dead and buried too?

Well, it’s just the US arm that’s going to opt for bankruptcy proceedings. The subsidiaries have been kept out of it. So on the face of it, it’s business as usual here.

But The Morning Context points out something quite pertinent. It looks like Ebix Singapore Pte Ltd controls the India operations. And it is a guarantor to Ebix USA’s lending arrangements. So we’ll have to see if this has any impact.

And even if it doesn’t, it’s hard to see the IPO sail through smoothly. We’ve already pointed out the lack of interest from fund managers and the SEBI warning. And investors will be wary too after all the scrutiny around Ebix’s complex web of subsidiaries and the apparent lack of proper disclosures in its IPO document.

So will Robin Raina be able to turn Ebix's fortunes around once again? Time will tell.

Until then…

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