Rategain Travel Technologies IPO - Information Note

5paisa Research Team 5paisa Research Team 7th December 2021 - 10:33 pm

Rategain Travel Technologies Ltd is a technology-driven solutions provider to the travel and leisure industry. It services a number of points in the leisure value chain including hotels, airlines travel agents, package providers, car rentals etc.

The company heavily leverages on artificial intelligence and machine learning to help their clients make sense of big data for workable and actionable business solutions. It is basically a B2B offering.

Rategain Travel Technologies Ltd currently works with over 1,434 corporate customers across the travel and leisure value chain. Its hospitality technology solutions are based on 3 platforms viz. Data as a Service (DAAS), Distribution and Marketing Technology (MarTech)

All these solutions are offered by Rategain Travel Technologies Ltd via the software as a solution (SAAS) platform making it asset light and also scalable.

Key terms of the IPO issue of Rategain Travel Technologies Ltd

Key IPO Details	Particulars	Key IPO Dates	Particulars
Nature of issue	Book Building	Issue Opens on	07-Dec-2021
Face value of share	Rs.1 per share	Issue Closes on	09-Dec-2021
IPO Price Band	Rs.405 - Rs.425	Basis of Allotment date	14-Dec-2021
Market Lot	35 shares	Refund Initiation date	15-Dec-2021
Retail Investment limit	13 Lots (455 shares)	Credit to Demat	16-Dec-2021
Retail limit - Value	Rs.193,375	IPO Listing date	17-Dec-2021
Fresh Issue Size	Rs.375.00 crore	Pre issue promoter stake	65.42%
Offer for Sale Size	Rs.960.74 crore	Post issue promoters	54.87%
Total IPO Size	Rs.1,335.74 crore	Indicative valuation	Rs.4,537 crore
Listing on	BSE, NSE	HNI Quota	15%
QIB Quota	75%	Retail Quota	10%

Data Source: IPO Filings

Here are some of the key aspects of the Rategain Travel Technologies Ltd business model

1) Rategain Travel Technologies Ltd a strong B2B customer base of 1,434 customers with several Fortune-500 companies in the list.

2) Its focus on artificial intelligence and machine learning helps it to provide innovative travel related solutions to its institutional clients.

3) For a leisure industry that was worst hit by the pandemic, leveraging big data will be the key to the future. This will also help them take on competition from Airbnb.

4) Rategain Travel Technologies Ltd plans to substantially deleverage its debt as well as the debt of its subsidiaries, which is likely to be value accretive.

5) Rategain will be well positioned to leverage the turnaround in the leisure industry as global growth and spending picks up over the next few years.

How is the Rategain Travel Technologies Ltd IPO structured?

The Rategain Travel Technologies IPO is a combination of a fresh issue and an offer for sale (OFS) and here is the gist of the offer

a) The fresh portion will comprise the issue of 88,23,529 shares and at the upper price band of Rs.425, the fresh issue component works adds up to Rs.375 crore.

b) The OFS component will comprise the issue of 2,26,05,530 shares and at the upper price band of Rs.425, OFS value works out to Rs.960.74 crore.

c) Out of the OFS of 226.05 lakh shares, promoters Bhanu Chopra, Megha Chopra and Usha Chopra will sell 40.44 lakh shares, 12.95 lakh shares and 1.52 lakh shares respectively. In addition, early investor Wagner, will sell 171.14 lakh shares.

d) The overall issue of Rs.1,335.74 crore via fresh issue and the offer for sale will result in the promoter stake coming down from 65.42% to 54.87%. Public shareholding post-IPO will stand enhanced to 45.13%.

These number are based on the upper end of the price band of Rs.425 emerging as the discovered price for the IPO.

Key Financial parameters of Rategain Travel Technologies Ltd

Financial Parameters	Fiscal 2020-21	Fiscal 2019-20	Fiscal 2018-19
Sales Revenues	Rs.264.09 cr	Rs.457.61 cr	Rs.272.70 cr
Total Assets	Rs.439.80 cr	Rs.397.11 cr	Rs.284.90 cr
Net Profit / (Loss)	Rs.(28.58) cr	Rs.(20.10) cr	Rs.11.03 cr
Asset Turnover Ratio	0.60X	1.15X	0.96X
Net Profit Margins (NPM)	(10.82%)	(4.39%)	4.04%

Data Source: Company RHP

Rategain Travel Technologies Ltd caters to the travel and leisure segment which was globally one of the worst affected sectors due to being a high contact intensive sector. As a result, the company has made net losses in FY20 and FY21 as against a net profit in FY19.

The fresh issue component will be used to deleverage Rategain UK as well as to invest in organic and inorganic growth. Both are likely to be value accretive. The company has an indicative market cap of Rs.4,537 crore which discounts the FY20 revenues by 10 times.

Investment Perspective for Rategain Travel Technologies Ltd IPO

Here is what investors must consider before investing in the Rategain Travel Technologies Ltd IPO.

a) The company is a niche play in providing technology solutions to B2B clients. Rategain will benefit from the trend of travel companies hiving off most activities externally.

b) The fresh issue component will be applied for technology upgradation, expansion, M&A and also for debt reduction. These are expected to be value accretive for Rategain.

c) The company may be perfectly poised to gain from the sharp turnaround in the leisure and travel services and that could expand profits rapidly.

d) Its current SAAS based model is rapidly scalable with minimal investments and that should be a major entry barrier for more players to drive down prices.

e) Due to 2 years of losses, traditional valuation metrics may be out of place, but it is good to get a solid franchise at a valuation of just Rs.4,537 crore.

The challenge for Rategain would be to ensure that its clients in the travel and leisure industry do not witness too much of collateral damage to their balance sheets due to the pandemic. With the Omicron virus make a return, that remains a big risk factor in this IPO.

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