The IPO frenzy continues on Dalal Street, with four public issues opening for subscription this week! Rategain Travel Technologies Ltd, a travel technology firm, will launch its three-day IPO tomorrow— December 7. In this article, we take a closer look into the company and its IPO.
Company Profile – Rategain Travel Technologies Ltd
Rategain Travel Technologies Ltd (RTTL) is the largest Software-as-a-Service (SaaS) company in the hospitality and travel industry in India. It offers solutions across a wide spectrum of verticals, including hotels, airlines, online travel agents (OTAs), vacation rentals, package providers, car rentals, rail, travel management companies, and cruises.
The company provides a suite of interconnected products that manage the revenue creation value chain for customers by leveraging big-data capabilities and integration with other tech platforms. Thus, RTTL helps hospitality and travel providers to acquire more guests, retain them via personalized experiences, and ultimately maximize their margins.
Business Verticals:
The company delivers solutions through three business categories:
- Data as a Service (DaaS) – Provides information such as market dynamic pricing and analytics. This segment tracks over 5.83 billion price points from various sources and issues data on pricing, rating, ranking, availability, and room descriptions.
- Distribution – Provides information on availability, rates, and inventory to different hotel aggregators or agents.
- Marketing Technology – Manages social media engagements and promotional campaigns.
RTTL served 1,462 customers as of September 30, 2021 (Q2 FY22), including eight Fortune Global 500 companies. Its prominent clients are Six Continents Hotels Inc., Kessler Collection, Lemon Tree Hotels Ltd, and Oyo Hotels and Homes Pvt Ltd. The company services its customers in multiple geographies and local go-to-market teams. Moreover, they have offices in six countries.
RateGain has grown its customer base over the years through well-developed sales and customer success. It focuses on marketing strategies/functions that generate and convert quality sales leads. The company has expanded its product portfolio to include artificial intelligence (AI) and machine learning capabilities. As a result, they are now one of the largest aggregators of data points for the hospitality and travel industry in the world.
About the IPO
Rategain Travel Technologies’ public issue opens on December 7 and closes on December 9. The company has fixed Rs 405-425 per share as the price band for the IPO.
The fresh issue of shares (of the face value of Rs 1 each) aggregates to Rs 375 crore. The IPO also includes an offer for sale (OFS) of up to 2.26 crore equity shares by promoters and early investors. Individual investors can bid for a minimum of 35 equity shares (1 lot) and in multiples of 35 shares thereafter. You will need a minimum of Rs 14,875 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 455 equity shares (13 lots).
RTTL will utilise the net proceeds from the IPO for the following purposes:
- Repayment and/or prepayment of debt availed by Rategain UK – Rs 85.26 crore
- Payment of deferred consideration for the acquisition of DHISCO (a hotel distribution service) – Rs 25.2 crore
- Strategic investments, acquisitions, and to boost inorganic growth – Rs 80 crore
- To make investments in technology innovation, artificial intelligence, and other organic growth initiatives – Rs 50 crore
- Purchase of capital equipment for the company’s data center – Rs 40.77 crore
- General corporate purposes.
Financial Performance
RTTL has posted losses over the past two financial years. In FY20, the company registered total revenue of Rs 457.6 crore and incurred a loss of Rs 20.1 crore. Its revenue for FY21 stood at Rs 264.1 crore, and the net loss widened to Rs 28.6 crore. The negative earnings can be attributed to the adverse impact of the Covid-19 pandemic on its operations. However, their gross margins have been above 76% during this period. EBITDA fell 78.5% YoY to Rs 6.15 crore in FY21.
The company added 272 active customers from 110 countries during the period from FY19 to FY21.
Risk Factors
- Factors such as Covid induced lockdowns and movement restrictions can have an adverse impact on RTTL’s business and financial performance.
- RateGain’s customers are typically not obliged to renew, upgrade, or expand their contracts with the company. Thus, customer retention rates could be low.
- The inability to attract new customers or retain existing customers in a cost-effective manner could severely affect the company.
- The market for Software as a Service (SaaS) solutions in the hospitality and travel industry is new and yet to evolve. If the market develops slowly than anticipated or declines, RateGain’s business could be adversely affected.
- RTTL derives a significant portion of its revenue (~82%) from a limited number of markets (mainly North America and Europe). Any adverse developments in these markets could harm the company’s overall operations.
- The company has a history of net losses and anticipates increased expenses in the future.
IPO Details in a Nutshell
The book-running lead managers to the public issue are IIFL Securities, Kotak Mahindra Capital, and Nomura Financial Advisory & Securities (India). Rategain Travel Technologies had filed the Red Herring Prospectus (RHP) for its IPO on November 28. You can read it here. Out of the total offer, 75% is reserved for Qualified Institutional Buyers (QIBs), 15% for Non-Institutional Investors (NIIs), and 10% for retail investors.
Conclusion
RateGain’s vision is to become the leading revenue maximization platform for the hospitality and travel industry. Its integrated technology platform, powered by artificial intelligence (AI), enables customers to increase their revenue through customer acquisition, retention, and wallet share expansion. As per reports, third-party travel and hospitality technology is estimated to be a $5.91 billion market in 2021. The market is expected to grow at a CAGR of 18% to reach $11.47 billion by 2025. RTTL could greatly benefit from the growth in this sector due to its first-mover advantage.
However, the company is exclusively focused on the hospitality and travel industry, which is highly sensitive to economic conditions. The general sentiments in this industry continue to be weak due to the Covid-19 pandemic. Analysts have also red-flagged the aggressive valuation of the issue.
RTTL’s IPO shares are trading at a premium of Rs 85-100 in the grey market. Before applying to this IPO, wait to see if the portion reserved for institutional investors gets oversubscribed. As always, consider the risks associated with the company and come to your own conclusion.
What are your opinions on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.
