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  • Nov 16, 2023 - Multibagger Smallcap Stock Announces QIP to Raise Rs 600 Crore

Multibagger Smallcap Stock Announces QIP to Raise Rs 600 Crore

Nov 16, 2023

Multibagger Smallcap Stock Announces QIP to Raise Rs 600 Crore

Last month, we wrote about how India has witnessed a surge in the rush for raising funds via the Qualified Institutional Placements (QIPs) route.

Union Bank of India.

Bajaj Finance.

IDFC First Bank.

Suzlon Energy.

Adani Green Energy.

The list goes on... companies like Ramkrishna Forgings, Texmaco Rail, and Jupiter Wagons (all from the capital goods sector) have also committed to raising funds via this avenue.

Adding to this list is a smallcap IT firm which recently launched its QIP.

Travel tech firm Rategain Travel Technologies launched its QIP on 15 November 2023 to raise Rs 6 billion (bn).

According to reports, the company will raise Rs 6 bn via QIP while keeping the greenshoe option open for an oversubscription of Rs 2 bn.

This will lead to an 8% equity dilution through the QIP route.

The company had fixed the floor price at Rs 676.66 per share, reflecting a 5% downside from 15 November's closing price.

About Rategain Travel Technologies

Rategain Travel Technologies is the largest SAAS (software as a service) player in travel and hospitality segment in India.

It helps the clients like hotels, airlines, online travel aggregators like Expedia to acquire guests, service them and drive engagement with them to command better wallet share through its AI powered tech platform.

It helps the end clients with operational and management aspects, along with analysing travel-based data in a way that helps its clients increase engagement with the customers along with wallet share.

For example, if clients have certain preferences, the company might make use of this data to help hotels service them better and drive engagement and wallet share.

Rategain's Business Segments

The company operates in three divisions.

First is Data as a Service, which comprises around 29% of its revenue.

Through this vertical, it provides real time insights into demand, supply, and pricing trends in the industry.

This helps its clients such as hotels, airlines, OTAs to price their room inventory accordingly.

The revenues in this segment are subscription based, where clients pay a fee to access the service, and hybrid model, where minimum subscription fees is followed by pay per use charge.

The second is the Distribution segment, which forms 34% of the revenue.

This segment, ensures seamless connectivity between hotels and their demand partners.

This requires efficient real time communication about inventory availability, updating gallery, guest reviews, processing bookings, pricing and in a standardised and appealing format.

The revenues in this segment come from subscription and transactions, where the company generates revenue whenever a guest makes a booking.

The third is the Martech segment, basically marketing tech, accounting for highest share in revenues of around 37%.

Here, the company offers AI and digital marketing tools and services to help hotels improve brand presence on social media, and also helps optimise direct bookings besides monitoring engagement.

As the company already has a lot of data based on travel intent, the company uses it to drive business for clients, and offers performance-based marketing. The revenues are based on subscriptions here.

With overall subscription revenue at 75%, there is a high visibility in the company's business. The company enjoys high revenue retention rates of over 90%.

Financial Performance

In the first quarter of FY24, the firm had reported a revenue growth of 79.8% while profit spiked around 196% to Rs 249 million (m).

Investors tracking the stock were expecting fireworks in the following quarter too and surely, the company did not disappoint.

Earlier this month, the company reported its Q2 numbers where profit more than doubled on a YoY basis to Rs 300.4 m amid strong operational performance.

Revenue growth was recorded at 88% and stood at Rs 2.3 billion (bn).

Meanwhile, the company saw a significant improvement in its operating margins which spiked to 19.8%.

The company said that this strong operational performance was due to expansion of relationships with its marquee enterprise global customer base across the travel & hospitality space and because of new client additions.

The company has new contracts worth Rs 4 bn and this healthy pipeline provides the much needed revenue visibility for the medium term.

The company's business is going in the right direction as the lifetime value to customer acquisition cost has been inching up.

For FY24, the management has shared a guidance of 55% to 58% growth with PAT margin at 12%.

The company's balance sheet is debt free.

How Rategain Travel Technologies Share Price has Performed

In the past one month, the stock has rallied over 16%.

On a YTD basis, the stock is up 140%.

Rategain Travel Tech has a 52-week high of Rs 730 touched on 15 November 2023 and a 52-week low of Rs 263 touched on 23 December 2022.

Here's a table comparing Rategain Travel Tech with its industry peers on different parameters.

Comparative Analysis

Company Rategain Saksoft KPIT Tech Cyient Nucleus Software
ROE (%) 10.5 22.9 26.6 15.8 23.1
ROCE (%) 10.7 29.6 35.1 19.9 31.2
Latest EPS (Rs) 9.4 8.9 17.8 60.1 76.3
TTM PE (x) 75.7 40.2 78.3 28 17.7
TTM Price to book (x) 10.1 8.4 20.5 4.6 5.3
Dividend yield (%) 0.0 0.2 0.3 1.6 0.7
Industry PE 26.8
Industry PB 7.2
Data Source: Ace Equity

Conclusion

As several businesses like Rategain gear up for economic expansion, the resurgence of QIPs is an intriguing trend to watch closely.

It not only reflects the financial prowess of India Inc. but also hints at a brighter future for the country's economy.

However, it's essential to remember that QIPs are typically associated with bull markets. They have a history of surfacing when the secondary market is rallying.

This aligns with the fact that companies would prefer diluting their shareholding at a higher valuation.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...

Yash Vora

Yash Vora is a financial writer with the Microcap Millionaires team at Equitymaster. He has followed the stock markets right from his early college days. So, Yash has a keen eye for the big market movers. His clear and crisp writeups offer sharp insights on market moving stocks, fund flows, economic data and IPOs. When not looking at stocks, Yash loves a game of table tennis or chess.

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