Hindenburg EBIX Rebuttal 6-26-22 by TheGribbler.pdf - TheGribbler

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Rebuttal to Hindenburg Report re Ebix, Inc. (NASDAQ:EBIX) dated June 16, 2022 Prepared on June 26, 2022 By TheGribbler Important Disclaimer: I am a personal investor that owns EBIX common stock as of the date of this report. I was not compensated in any way, directly or indirectly, by EBIX or any other party to prepare this report. I am not registered as an investment advisor in the United States or have similar registration in any other jurisdiction or hold any other professional qualifications. I am not associated with any investment firms, funds, research firms or any other corporation or institution. Use of this report is at your own risk. In no event shall I be liable for any direct or indirect trading losses caused by any information in this report. You further agree to do your own research and due diligence, consult your own financial, legal, and tax advisors before making any investment decision with respect to transacting in any securities discussed herein. This is not an offer to sell or a solicitation of an offer to buy any security. To the best of my ability and belief, all information contained herein is accurate and reliable, and has been obtained from public sources I believe to be accurate and reliable. However, such information is presented “as is,” without warranty of any kind – whether express or implied. I make no representation, express or implied, as to the accuracy, timeliness, or completeness of any such information or with regard to the results to be obtained from its use. All uses of the word “overlooked” or similar language with reference to the Hindenburg report and any forward-looking statements, among other ideas or observations expressed in this report, are meant to be expressions of opinion only and not to be construed as statements of fact. All expressions of opinion are subject to change without notice, and I do not undertake to update or supplement this report or any of the information contained herein. Executive Summary While the Hindenburg report1 raises some legitimate questions about EbixCash’s gift card business, which resulted in enhanced disclosures by Ebix, my research indicates Hindenburg’s assertions of “fake revenue” are incorrect. I believe Hindenburg’s investigative findings can readily be explained by: • Outdated Ebix IR materials, in the case of photoshopped outlets, where overlooked evidence demonstrates both locations were CentrumDirect branded at the time the materials were prepared, and both locations were later rebranded to EbixCash • Outdated Ebix IR materials, in the Apollo and Reliance case studies, where overlooked evidence suggests both promotions were from 2017 or earlier and likely lapsed years ago • Overlooked whois website registration and phone number evidence linking Ebix-client Paytekk back to a legitimate payment and gift card company, i-Money, with 50 verified LinkedIn employees • Commission-based net revenue recognition policy for ePocket that recasts the criticized $151K in sales to as much as $28m of supported gift card volume, in the year prior to Ebix reporting any sales • Covid-related office relocations based on Hindenburg’s check of pre-covid corporate addresses • A misunderstanding of the relevance of Ebixcash’s mobile wallet app relative to EbixCash’s core “phygital” distribution strategy and B2B technologies. Mobile wallet is not core to Ebixcash • A mischaracterization of Ebix’s collection of apps, where Ebix’s Via.com travel app constitutes the disclosed 1.5m travel app downloads and Hindenburg conflates travel with payment solutions In my opinion, Hindenburg’s findings do not demonstrate prima facie evidence of gross fraud or fake sales. After the resignation of auditor RSM, Ebix’s gift card business has been scrutinized by board- advisors Skadden and AlixPartners, EbixCash’s IPO underwriters, and two IPO auditors in India, including the Indian affiliate of Grant Thornton. No wrongdoing was discovered and no restatements required. The low-margin prepaid gift card sales and RSM auditor resignation are well documented in Ebix’s draft red herring prospectus (“DRHP”) filed with Indian regulators. In the absence of any material accounting or disclosure issues, EbixCash should be able to proceed with its IPO as planned later this year. IPO investors will look towards EbixCash’s profit centers, leading market positions, exciting business initiatives and travel-recovery story in India, which are not impacted by the gift card business. The declining EBITDA pointed out by Hindenburg is easily justified in the context of covid’s impact on several of Ebix’s key travel-exposed businesses, which are in the early stages of a recovery (international travel restrictions were just lifted in India on March 27). A successful IPO, even at a less attractive valuation than currently targeted, presents significant upside for Ebix shareholders relative to the current stock price. With its strong history of operating profits, solvency risk is minimal even in the event of no IPO. This rebuttal report is not intended to be a comprehensive review of the “long” thesis for Ebix. It is intended to be a rebuttal of the assertions made by the Hindenburg report. This rebuttal contains several pieces of exculpatory evidence that Hindenburg overlooked in their investigation, which I believe refute many of their key findings. Detailed evidence, pictures and citations are provided in the last section of this report, not in the summary section. 1 Hindenburg Report dated June 16, 2022 2 Summary of Key Findings 1.) Gift Card Profitability: In FY2021, EbixCash gift card profit margins were 0.9% resulting in earnings of only $800K out of EbixCash total earnings of $31 million. The Hindenburg report does not address the other $30.2 million of earnings. This earnings power was despite covid weighing heavily on results. 2.) Retail Outlet Gift Card Volumes: As recent Ebix disclosures have noted, the majority of gift card volume goes to Ebix’s corporate channel, with only a small amount going to Ebix’s retail outlet channel, due to issuing bank partner approvals and KYC requirements. This is consistent with Hindenburg receiving a lackluster response from its phone call sampling of 970 out of ~75,000 itzcash retail locations. 3.) Apollo Tyres Case Study: Hindenburg overlooked that the translated Hindi text on the promotion indicates the promo was from 2017. Current employees at Apollo would not likely be aware of a 5-year- old promotion when asked about EbixCash, especially if it was branded under itzcash at the time. Apollo appears to be an example of outdated IR materials, not evidence of a fake customer. 4.) Reliance Flipkart Promotion: Hindenburg is skeptical of why Flipkart, an alleged competitor, would partner with Ebixcash. Hindenburg overlooked that Flipkart and itzcash announced a partnership in 2015 that is evidenced in Indian media to have still existed in 2017 at the time of the itzcash acquisition. Like Apollo, this was an old program that had likely lapsed years ago and may have been done under the itzcash brand. This is another example of outdated IR materials, not evidence of a fake customer. 5.) Paytekk: This is a disclosed 10%+ Ebix corporate gift card customer. Hindenburg found the registered office to be closed and could not find much about this company. The office relocation reasonably could have been the result of covid. Hindenburg overlooked whois website registration information and a matching phone number on Paytekk’s promotions that link Paytekk back to a legitimate payments company, i-Money, claims 50,000 users and has 50 verified employees on LinkedIn. Disclosed Ebix gift card sales only represented 28% and 25% of Paytekk’s business in FY2020 and FY2021. Paytekk’s overall sales increased YoY by 6x to $168 million, evidencing an overall industry trend in prepaid gift card sales. 6.) ePocket: The other 10%+ disclosed Ebix corporate client is ePocket Online Payments. Hindenburg portrays ePocket as an unpopular Android app, but a review of the epocket.in website indicates it is primarily a payments network platform that runs on PC point-of-sale and through SMS applications, thus Android downloads may not be a meaningful indicator. Hindenburg overlooked a possible newer 2021 version of the website, epocketonline.com, due to extensive similarities between the two service offerings, website layout, website tab order, partners and legal terms and conditions. The latter website notes other office locations that Hindenburg did not claim to have visited and may explain Hindenburg’s findings at the old, pre-covid corporate address. Hindenburg criticizes ePocket’s FY2020 sales of only $151,000 but overlooked ePocket’s revenue recognition policy and commission revenue disclosures that make clear ePocket reports on a net basis. From FY2019 to FY2020, ePocket’s commission revenue more than doubled (in contrast to the 77% decline in total revenue claimed by Hindenburg), implying gross sales of commission-based products increasing from as much as $14 million to as much as $28 million, year over year. In FY2020, Ebix reported sales to ePocket were zero, so these implied gross volumes were independent of Ebix. FY2021 financials are not available for ePocket. 3 7.) Photoshopped Outlets: Hindenburg alleges that Ebix photoshopped pictures of two EbixCash outlets in its IR materials, but evidence suggests this is because these locations were still branded as CentrumDirect (a company Ebix acquired) at the time the IR materials were prepared. Hindenburg overlooked evidence on Google Maps, JustDial and other websites that confirm the Centrum locations existed. Ebix has recently provided photographic evidence showing that both locations were rebranded to Ebixcash. This appears to be a case of IR shortcuts and outdated materials, not evidence of fake locations. 8.) App Downloads: Hindenburg misstates that Ebix claims 1.5 million downloads of its EbixCash app. The primary disclosures by Ebix in its DRHP and website clearly states that its travel apps have 1.5 million downloads. Hindenburg is conflating EbixCash’s travel disclosures with its payment solutions disclosures. Ebix’s primary Via.com travel app has 1.3+ million downloads and with its collection of other Via apps and bus apps, the number of travel app downloads approaches 3 million. 9.) EbixCash App: Hindenburg overemphasizes the relevance of EbixCash’s mobile wallet app relative to EbixCash’s core offering as a “phygital” distribution strategy into Tier II and III cities and small towns throughout India. When customers enter EbixCash’s locations to conduct remittance, bill pay or other types of transactions, the location processes the transaction digitally using web-based PC or other B2B technology, not the consumer-facing Android app. Mobile wallet is a crowded, low-profit vertical in India dominated by payTM, Google Pay, PhonePe and others. It is not surprising that Ebix has not prioritized its development to date. 10.) AHA Taxis: Hindenburg criticizes the AHA Taxis offering as being non-functional, but reviews from 2022 indicate the service is functioning. While the taxi offering may not have gained significant traction yet, and the service was impacted during covid lockdowns, AHA was a start-up operation that Ebix acquired for only $310,000. 11.) Solvency Risk: Hindenburg’s claims of solvency risk are greatly overstated. If the IPO is completed before debts become due in February 2023, even at a reduced valuation, it will be a successful outcome for Ebix and facilitate a debt refinancing on attractive terms. Even in a bearish scenario where no IPO occurs, Ebix should still be able to easily refinance its debt with new senior debt and a small, subordinated tranche. While a higher interest rate environment increases debt costs, currently Ebix is on a LIBOR+5.0% penalty-program with its current lenders from covid-era waivers and credit agreement amendments. Prior to covid, at the end of 2019, Ebix enjoyed a much lower LIBOR spread of only +2.25% at similar leverage ratios to today. The company’s currently healthy 4x ratio with an expanding travel-recovery EBITDA story should allow refinancing on terms more favorable than the current penalty structure. Ebix’s strong history of operating cashflows and recent traction in its U.S. life and annuity exchange business should further enhance its credit profile. Overall, in my view, the upside of the potential IPO in the next few months far outweighs the downside risk of credit deterioration. 4 Details of Findings 1.) Gift Card Profitability: The Hindenburg report focuses almost exclusively on EbixCash’s gift card business in India. Hindenburg concedes in their report that gift card margins are “razor thin.” My calculations based on EbixCash’s DRHP show gift card margins of 0.9% and gift card profits of only approximately $800,000 in EbixCash’s latest fiscal year, out of $31 million of total Ebixcash profits.2 The Hindenburg report does not question the legitimacy of the other $30.2 million of profit creation from remittance, forex, travel, bus exchanges, IT services, BPO, etc. This earnings power was despite covid weighing heavily on results. As travel recovery in India continues to rebound, which is expected to see a boost in Q2 figures because international travel restrictions were lifted in India starting March 27,3 I expect EbixCash’s revenues (excluding gift cards) to expand further. EbixCash is a leader in many international travel-linked verticals such as forex and outbound student remittance, and its direct travel business through Via.com, which conducts a lot of cross-border travel business between India and other Asian countries. In Ebixcash’s Q1 numbers, we already can see the initial phases of a recovery underway. EbixCash reported year- over-year growth in travel and foreign exchange revenues of 85% and 109%, respectively, and, excluding gift cards, EbixCash revenues increased 30.7% during the same period.4 2.) Retail Outlet Gift Volumes: The majority of gift card volume goes to EbixCash’s corporate channel, with only a small amount going to Ebix’s retail outlet channel, due to issuing bank partner approvals and KYC requirements. This was confirmed in Ebix’s recent press release statements: “Per EbixCash's contract with issuing Banks, gift cards can only be sold through Corporates approved by the Banks, to their Corporate network after a mandated (Know Your Customer (KYC) onboarding process.” “Per EbixCash's contract with issuing Banks, Gift cards cannot be sold through just any EbixCash franchisee or retail outlet.”5 This understanding is consistent with Hindenburg receiving a lackluster response from its phone call sampling of 970 out of ~75,000 Ebixcash itzcash retail locations. 2 Gift card margins calculated from EbixCash’s DRHP page 335, notes 39 and 41, showing INR 6,911.06 million sales of prepaid instruments vs purchase of prepaid instruments of INR 6,849.06 million. Total profits during FY2021 of INR 2,429.15 million from DRHP page 200 3 https://www.travelpulse.com/news/destinations/india-reopens-lifting-2-year-ban-on-international-passenger- flights.html 4 Ebix Press Release dated May 10, 2022 5 Ebix Press Release dated June 21, 2022 5 3.) Apollo Tyres Case Study: The two corporate “case studies” Hindenburg contacted from Ebix’s investor presentation, Apollo Tyres and Reliance General, can readily be explained as simply being outdated investor materials rather than evidence of fake clients. These case studies have been in Ebix’s IR materials for many years, dating back to the time it purchased itzcash in 2017. In the case of Apollo Tyres, Hindenburg overlooked that the translated Hindi text (overlaid below using Microsoft picture translation) on the promotion indicates the promo was from 2017: Further, I believe the Apollo promotion was possibly still branded under “itzcash” at the time, despite the investor materials depicted an EbixCash card. Current employees at Apollo would likely be unaware of a 5-year-old promotion especially if Hindenburg did not specifically enquire about “itzcash” and instead only enquired about “Ebix” cards. 6 4.) Reliance Flipkart Promotion: Hindenburg is skeptical of why Flipkart, which he refers to as an EbixCash “competitor,” would partner with Ebixcash to offer Flipkart vouchers to Reliance employees. Hindenburg overlooked that Flipkart and itzcash announced a partnership in 20156 that is evidenced in Indian media to have still existed in 2017,7 the year itzcash was acquired. The partnership allowed for ordering Flipkart products at any of itzcash’s 75,000 locations in the nascent days of e-commerce in India. Like Apollo, this was an old program that had likely lapsed and was possibly never branded under Ebixcash, so the enquires Hindenburg made are not dispositive. This is another example of outdated investor materials, not evidence of a fake customer, as refuted by this well-publicized partnership. Excerpt from Inc42 article dated January 3, 2017, referencing Flipkart as an itzcash partner: 6 https://economictimes.indiatimes.com/industry/services/retail/itzcash-card-ties-up-with-flipkart-for-online- shopping/articleshow/49166906.cms 7 https://inc42.com/startups/itzcash-growth-story/ 7 5.) Paytekk: Prepay Payment Services d/b/a Paytekk is a disclosed 10%+ Ebix corporate gift card customer. Hindenburg found the registered office to have closed. This could reasonably have been the result of covid, as many small businesses in India terminated leases and later relocated during the country’s extensive 2021 lockdowns. Hindenburg could not find much about Paytekk, claiming: “A Google search for “Prepay Payment Services” yields virtually no results aside from its corporate registration. As described below, searches for the company’s apparent d/b/a name (“doing business as” name) of Paytekk Wallet were similarly fruitless. The entity appears to have no website and no other online presence.” – Hindenburg Report It appears that Hindenburg overlooked whois website registration information for Paytekk, showing it was registered and administered by dev.ops@i-money.co.in. This connection to i-Money is confirmed by several gift card related posts on Paytekk’s Facebook page8 (one example9 of many shown below left) showing an exact phone number match (011-4221-9595) to the phone number listed on the bottom of i-Money’s website, http://i-money.co.in/ (right). 8 https://www.facebook.com/paytekk.in/ 9 Paytekk example Facebook prepaid card post 8 A review of i-Money’s website, and the related website for i-Money Pay (www.imoneypay.in), indicate that it is a legitimate operation with various payment and gift card related offerings, and a claimed 10- year history serving 200 brands with 50,000 active users: The i-Money Pay website claims: "E-Meditek Global Private Limited (iMoneyPay) is a payment and banking technology company, based out of Delhi. As a complete payments platform, it helps 50,000+ businesses collect and send money with solutions such as an easy to integrate payment gateway that supports instant refunds; Payouts – an API banking platform for disbursals." A review of pictures of i-Money employees on Google Maps10 and i-Money’s LinkedIn page11 noting 50 registered employees on LinkedIn add further substance to the legitimacy of the operation. The Hindenburg report notes that Paytekk’s LinkedIn page claims to have 50-200 employees, though none are registered. i-Money’s LinkedIn page also claims to have 50-200 employees and substantiates the Paytekk LinkedIn claims. Paytekk reports gift card sales on a gross basis, and financial disclosures reveal an alignment with Ebix’s disclosures. Just for the Paytekk entity alone (not counting any other i-Money entities), Ebix’s gift card sales only represented 28% of Paytekk’s sales in FY2020, shrinking to 25% in FY2021.12 While Ebix’s sales to Paytekk increased 5.2x from $8 million to $42 million year-over-year, Paytekk’s overall sales increased at 5.6x from $30 million to $168 million, evidencing an overall industry trend in prepaid gift card sales. It is not a far reach to see how Paytekk is part of the i-Money operation and is a completely legitimate payments company that is completely independent from Ebixcash, with EbixCash only representing a minority portion of its business. 10 i-Money listing on Google Maps 11 i-Money listing on LinkedIn 12 Disclosed Ebix sales to Prepay, Ebix Payment Services Audit, page 73, divided by revenue from sale of products, Paytekk FY2021 Financial Statements, page 74, 9 6.) ePocket: The other 10%+ disclosed Ebix corporate gift card client is ePocket. Hindenburg portrayed ePocket as an unpopular Android app, but a review of the ePocket’s website (http://www.epocket.in) indicates it is primarily a payments network platform that runs on PC point-of-sale and through SMS applications, thus Android downloads may not be a meaningful indicator. As well, it appears another website, epocketonline.com, is possibly a related operation due to extensive similarities between the two websites offerings, tab ordering on each website, listed partners and legal terms and conditions. The former epocket website was last updated in 2017, and the latter website appears to be a more current version of it from 2021. Both ePocket websites offer a similar suite of services based on Mobile Recharge, DTH Recharge, Postpaid Bill Payments, Money Transfers, etc. with a similar listing of partners. The terms and conditions of the two websites appear to use verbatim language in many provisions, follow a similar organization of sections, and the newer 2021 website appears to be a revised, cleaned up version of the older 2017 site. I’ve provided an example below of the beginning of each website’s terms and conditions showing nearly identical language. The newer epocketonline.com website notes other office locations that Hindenburg did not claim to visit, and could explain why Hindenburg found the corporate office they visited had closed. 10 Financially, Hindenburg overlooked that ePocket reports commissions from gift card sales on a net basis, unlike Ebix. This is clear from the revenue recognition section of ePocket’s audit report:13 From FY2019 to FY2020, ePocket reported net commission revenue increasing from approximately $27,000 to $55,000, as converted from the INR figures below.14 Hindenburg portrayed this as a shrinking business with a 77% revenue decline, but it’s clear the relevant commission-based products like gift cards were increasing, while other sales decreased, confirming the industry trends. Based on recent Ebix disclosures15 that gift card sellers collect a commission of 20 to 40 basis points, this implies gross volumes increasing from a range of $7-$14 million to $14-$28 million year over year, assuming all commission-based products share a similar margin or assuming the bulk of e-Pocket’s commissions relate to gift cards. Further, in FY2020, Ebix reported sales to ePocket were zero, so such potential gross volumes were completely independent of Ebix. Hindenburg criticized ePocket saying: “The top customer reported just $151,000 in sales in its most recent financials” but this criticism falls short in the context of that net revenue representing millions of dollars of gift card volume. In FY2021, Ebix reported $46 million gross sales to ePocket but there are no ePocket FY2021 financial statements to compare against. It is not a stretch to see how ePocket could potentially achieve such higher sales volume in FY2021, considering FY March 31, 2020 above does not yet include any covid bump, and considering Ebix’s other disclosed client Paytekk’s volumes increased 5.6x from FY2020 to FY2021, as noted in the prior section of this report. 13 E-pocket audit report, page 21 14 E-pocket audit report, page 17 15 Ebix Press Release date June 21, 2022 11 7.) Photoshopped Outlets: Hindenburg alleges that Ebix photoshopped pictures of two EbixCash outlets in its materials. However, this appears to be a result of these locations still being branded as CentrumDirect (a company Ebix acquired) at the time the IR materials were prepared. Hindenburg overlooked evidence on Google Maps and other websites that confirm the locations were indeed CentrumDirect outlets prior to their rebranding to Ebixcash. Ebix has recently provided photographic evidence showing that both locations were rebranded to Ebixcash at some point prior to their relocations during covid. This appears to be a clear case of dated IR materials, not evidence of fake locations. The first location in question is the “Vinyas Arcade” location in Bangalore. Hindenburg notes the location adjacent to Vinyas Arcade location is now Atiyas Electric and claims people there have said it's been there at least 2 years. I found the address and location on Google Maps for Atiyas Electric with matching street view.16 I also found a listing on JustDial17 for a CentrumDirect location at the exact same address of #35, 2nd & 3rd Floor, Vinyas Arcade, 11th Main Rd, 5th Block, Jayanagar, Bengaluru. Note the address in the below two listings matches exactly. 16 Google Maps Street Image of Vinyas Arcade 17 JustDial listing for CentrumDirect at Vinyas Arcade in Bangalore 12 Next, we can compare the dates of reviews between CentrumDirect from JustDial (on the left), and Atiyas Electric from Google Maps18 (on the right). There are 62 reviews on JustDial for this CentrumDirect location ranging from September 2011 to April 2019. For Atiyas, at the same address, the earliest reviews on Google Maps begin “a year ago” suggesting this is a relatively new location and bolstering the evidence that Centrum was at this spot. This is consistent with Hindenburg’s findings, and evidences that the photoshopped location at Vinyas Arcade was clearly an old CentrumDirect location. In the first picture below from JustDial, there is signage that says “We @ Centrum” above the two metal door handles, with a list of services besides it. In the second picture below, we can see where Ebix manipulated the same signage to instead read “We @ Ebixcash” where the manipulated banner covers up the top of the metal handles, with the same list of services besides it. Finally, in the third picture, from Ebix’s recently updated disclosures,19 we can see that this Vinyas Arcade location was indeed eventually rebranded to EbixCash before it was closed during covid. This chain of evidence suggests that Ebix’s inclusion of the photoshopped picture in its IR materials was a case of shortcuts by IR and dated materials, not of deception or fraud. 18 Google Maps listing for Atiyas Electric at Vinyas Arcade in Bangalore 19 https://ebixcash.com/officerelocation/ 13 The second location in question, the "Sterling Centre" one in Mumbai, also appears to be an old CentrumDirect branch that had not yet been rebranded to EbixCash at the time the IR materials were prepared, and was later rebranded. The launch of the Sterling Centre location was announced on Twitter by CentrumDirect back in September 2017 with several pictures of the launch party.20 From Ebix’s recently updated disclosures,21 it is clear that the Sterling Centre Mumbai location was rebranded as EbixCash at some point prior to the location being relocated during covid: This chain of evidence suggests that Ebix’s inclusion of the second photoshopped picture in its IR materials was also a case of shortcuts by IR and dated materials, not of deception or fraud. 20 https://twitter.com/ebixcash_wm/status/913737218631516160 21 https://ebixcash.com/officerelocation/ 14 8.) App Downloads: Hindenburg misstates that Ebix claims 1.5 million downloads of its EbixCash app. The prominent disclosures by Ebix in its DRHP22 (top picture) and website23 (bottom picture) clearly states that its travel apps have 1.5 million downloads. Hindenburg conflates travel with payment solutions as shown below. Hindenburg cites directly to DRHP page 197 in their report, however page 197 of the DRHP clearly notes “travel” apps: Ebix has since updated its disclosures on app downloads,24 following the Hindenburg report. Ebix’s primary Via.com travel app has 1.3+ million downloads, and with its collection of other Via apps and bus apps, the number of travel app downloads approaches 3 million. 22 EbixCash DRHP page 197 23 https://ebixcash.com/discover-ebixcash/ 24 https://ebixcash.com/ebixcashmobileapps/ 15 9.) EbixCash App: It appears that Ebix is still improving the functionality of its mobile wallet EbixCash app, which Hindenburg heavily criticizes. However, Hindenburg is over-emphasizing the relevance of this to EbixCash’s core retail offering as a “phygital” distribution strategy into 4,000 cities, 75,000 towns and dozens of major airports and seaports throughout India,25 with hundreds of thousands of physical touchpoints. When customers enter EbixCash’s locations to receive inbound remittance (where Ebix enjoys a 70% market share of P2P MTO26), bill pay, outbound remittance, forex or other types of transactions, the location processes the transaction digitally using web-based PC or other B2B technology, not the consumer-facing Android app. Mobile wallet is a crowded, low-profit vertical in India dominated by payTM, Google Pay, Mobikwik, PhonePe and others. It is not surprising that Ebix has not prioritized its development to date. 10.) AHA Taxis: Hindenburg criticizes the AHA Taxis offering as being non-functional, but reviews from 2022 indicate the service is functioning. While the taxi offering may not have gained significant traction yet, and the service was impacted during covid lockdowns, AHA was a start-up operation that Ebix acquired for only $310,000.27 In February 2022, a user review28 said: Other recent reviews, such as from Google29 (on the right) are mixed. Negative reviews listed on some websites indicate that while some customers were unhappy with the service, or with some customer service aspects to cancel or change itineraries, they apparently were able to make initial payment, which refutes Hindenburg’s findings of a non-functional service. AHA is seemingly not a popular service at this point, and has some growing pains to improve, but Hindenburg portrays it as being non-functional. I don't think that's the case. 25 https://ebixcash.com/discover-ebixcash/ 26 EbixCash DRHP page 196 27 Ebix 10-K for 12/31/2019 page 4 28 https://www.mouthshut.com/product-reviews/AHA-Taxis-reviews-925865083 29 AHA Taxi reviews on Google Maps 16 11.) Solvency Risk: Hindenburg’s claims of solvency risk are greatly overstated. If the IPO is completed before February 2023, even at a reduced valuation, it will be a successful outcome for Ebix and facilitate a debt refinancing on attractive terms. Even in a bearish scenario where no IPO occurs, I believe Ebix will still be able to easily refinance its debt with mostly new senior debt and a small tranche of subordinated debt. While a higher interest rate environment increases debt costs, currently Ebix is on a LIBOR+5.0%30 penalty program with its current lenders from covid-era leverage ratio waivers and waivers related to failure to timely file its audit following RSM’s resignation.31 Prior to covid, at the end of 2019, Ebix enjoyed a much lower LIBOR spread of only 2.25%32 at similar 4x leverage ratios to today.33 The company’s current healthy ~4x ratios with expected growth in travel-recovery EBITDA should allow refinancing on terms more favorable than the current penalty structure. Ebix has also paid off $55.5 million of debts during the past twelve months, from March 31, 2021 to March 31, 2022, comprising a $45.3 million reduction of principal on its U.S. term loan and a $10.2 million reduction of its working capital facility in India.34 Ebix has a strong history of operating cashflow, and its U.S. insurance exchange business consistently generates strong cashflows. I expect recent traction in Ebix’s life and annuity exchanges, including recent client wins with JPMorgan and others, to continue to accelerate this business for Ebix. Overall, the upside of the potential IPO in the next few months far outweighs the downside of credit deterioration. Ebix Chairman & CEO Robin Raina 30 EBIX 10-K for 12/31/2021 pages 39-40 31 EBIX 8-K dated April 15, 2021 32 EBIX 10-K for 12/31/2019 page 49 33 EBIX Q1 2020 conference call transcript, page 4 34 EBIX 10-Q for 3/31/2021 pages 4 and 24; EBIX 10-Q for 3/31/2022 page 4 and 22 17