In the midst of a slew of digital IPOs, Rategain Travel Technologies Ltd offers investors a technology-driven solutions provider to the travel and leisure industry. Its client profile includes hotels, airlines travel agents, package providers, car rentals etc. Essentially, Rategain is a B2B offering to the entire leisure and travel value chain and also leverages on artificial intelligence and machine learning to fine tune its offerings.
Rategain Travel Technologies operates on a software as a service (SAAS) model as it caters to over 1,434 corporate customers, many of whom are Fortune 500 companies. Its technology solutions cover 3 platforms including Data as a Service (DAAS), Distribution and Marketing Technology ( MarTech). This helps Rategain adopt an asset light model.
Let us now turn to how the IPO of Rategain Travel Technologies is structured and how the OFS and the fresh issue actually add up
- Rategain will issue fresh shares to the tune of 88,23,529 shares, which aggregates to a fresh issue component of Rs.375 crore at the upper price band of Rs.425. These funds will be utilized to deleverage Rategain UK and organic and inorganic growth.
- Existing promoters and early investors will offer a total of 2,26,05,530 shares in the OFS valued at Rs.960.74 crore, at the upper end of the price band of Rs.425. Wagner will offer 171.14 lakh shares and the promoters will offer the balance.
- The fresh issue component and the OFS put together will add up to Rs.1,335.74 crore as the total size of the IPO. Post this IPO completion, the promoter’s stake will reduce from 65.42% to 54.87%, while public shareholding will increase to 45.13%.
Rategain Travel Technologies caters to the travel and leisure segment which was the worst affected segments due to its highly contact intensive nature. Consequently, the company made net losses in FY20 and FY21 against a net profit in FY19. However, these numbers should get better with the revival in spending and in income levels.
The company has an indicative market capitalization of Rs.4,537 crore at the upper band of the IPO price. P/E may not be relevant due to losses in the last 2 years on account of COVID lag effect. However, the valuation discounts the FY20 revenues by 10 times.
How investors should approach the Rategain Travel Technologies IPO?
The following factors should be considered by investors before taking an investment view on Rategain Travel.
- The company is a niche provider of technology solutions to B2B clients in the leisure and travel industry. In the post COVID scenario, most of the leisure businesses are likely to focus more on the client end and leave process management to external parties.
- The fresh issue is to be used for technology upgradation, expansion, M&A and debt reduction. These are value accretive, especially considering that the travel and leisure is likely to be the first off the block to benefit from a revival in spending.
- The company has adopted a SAAS based model which is not only rapidly scalable with minimal investments but the deep relations built withing the industry can be an entry barrier to new entrants in the segment.
- For the leisure industry that was hit by the pandemic, the future would lie in leveraging big data. This will also help them take on competition from Airbnb and OYO Rooms and the extensive use of AI and ML would be an added advantage in these circumstances.
The one risk that Rategain Travel has to live with is to ensure that its clients do not witness too much of collateral damage to their balance sheets. The Omicron variant has added a new element of risk and investors must keep that in mind while investing in the IPO of Rategain Travel Technologies.
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