AI-Driven SaaS Provider RateGain Travel IPO: Key Points to Know

The primary market will continue to be active in December as well. Many businesses have queued up to raise funds through an initial public offering (IPO) in December.

In this article, we will talk about the public issue of RateGain Travel Technologies - a travel tech start-up based in Noida.

RateGain Travel Technologies' three-day IPO will open for subscription on 7 December 2021. The software-as-a-service (SaaS) company plans to list on 17 December on the exchanges.

The anchor book of the company is expected to open for a day on 6 December 2021.

The company has fixed a price band of Rs 405-425 per equity share for its public offer. At the upper end of the price band, the issue will fetch the company Rs 13.4 bn.

Kotak Mahindra Capital Company, IIFL Securities, and Nomura Financial Advisory, and Securities (India) are the book running lead managers to the issue.

RateGain Travel Technologies IPO Details

Issue Type	Book Built Issue IPO
Face Value	Rs 1 per equity share
IPO Price	Rs 405 to Rs 425 per equity share
Market Lot	1 lot - 35 shares
Issue Size	Rs 13.4 bn
Fresh Issue	Rs 3.8 bn
Offer for Sale	Rs 9.6 bn
Basis of Allotment Date	Tuesday, December 14, 2021
IPO Listing Date	Friday, December 17, 2021

Data Source: Company's Red Herring Prospectus (RHP)

Promoter's stake in the company

Bhanu Chopra and Megha Chopra are the company promoters.

Promoters have 67.29% shareholding in the company and the remaining shares are held by public shareholders including Wagner and Avataar.

Investor Wagner will offload 17.1 m equity shares through offer for sale (OFS), while promoters Bhanu Chopra, Megha Chopra, and Usha Chopra will sell 5.5 m equity shares.

Category-wise reserved portion

Up to 75% of the net issue is reserved for qualified institutional buyers (QIBs), whereas non-institutional buyers will have 15% shares allocated for them.

Retail portion has been fixed at 10% of the net offer. Retail investors can invest a minimum of Rs 14,875 for one lot, and their maximum investment would be Rs 193,375 for 13 lots.

The company has also allocated equity shares worth Rs 50 m for its eligible employees and will give a discount of Rs 40 per share for eligible employees bidding in the portion reserved for them.

Utilisation of the net proceeds

As per the red herring prospectus (RHP), RateGain will now use Rs 852.6 m to repay a loan taken by RateGain UK from Silicon Valley Bank. In the DRHP, this expense was pegged at Rs 864 m.

Further, the company will use Rs 252 m of the proceeds in deferred consideration for the DHISCO acquisition from 2018. This consideration was earlier at Rs 262 m.

It will also look to invest Rs 800 m towards strategic investments, acquisitions and inorganic growth and Rs 500 m for technology innovation, artificial intelligence (AI), and other organic growth initiatives.

Earlier, the company had proposed to allocate Rs 433 m for purchase of certain capital equipment for its data centre and this proposed expense has now been brought down to Rs 407.7 m.

A brief insight of the company

RateGain Travel Technologies is one of the leading distribution technology companies globally and the largest software as a service provider in the travel and hospitality industry in India.

The firm offers travel and hospitality services across different verticals like hotels, airlines, online travel agents, meta-search companies, package providers, car rentals, cruises, and ferries.

The business provides inter-connected products to manage the revenue creation value chain leveraging big data capabilities and integration and over the period, expanded product portfolio to AI and machine learning capabilities.

RateGain Travel delivers travel and hospitality technology solutions through the SaaS platform through 3 business units.

1. Data as a Service (DaaS)

2. Distribution

3. Marketing Technology (MarTech)

RateGain Travel Technologies' customer base

As of 30 June 2021, it had over 1,400 clients, including eight global Fortune 500 companies.

Its customers include Six Continents Hotels, InterContinental Hotels Group firm, luxury hotel chain Kessler Collection, Lemon Tree Hotels, and Oyo Hotels and Homes Private Limited.

It caters to 1,186 large and mid-size hotel chains, 104 travel partners, such as airlines, car rentals and cruise companies, and over 144 distribution partners such as online travel agency (OTAs) like GroupOn and distribution companies like Sabre GLBL Inc. as clients in over 110 countries.

Quick look at the company financials

The company posted a consolidated loss of Rs 285.7 m in financial year 2021, against loss of Rs 201 m in previous year. Revenue in the same year declined to Rs 2.5 bn from Rs 4 bn.

In the five-month period ended August 2021, the loss stood at Rs 83.3 m against loss of Rs 78.5 m in the same period last fiscal.

However, revenue from operations increased to Rs 1.3 bn during the same period, from Rs 978.9 m year on year (YoY).

Key Parameters

(Rs m)	FY19	FY20	FY21
Total Income	2,727	4,576.1	2,640.9
Growth (%)		68%	-42%
Expenses	2,632.1	4,753.8	2,887.2
Net Profit\Loss	110.3	-201	-286

Data Source: Company's RHP

The Covid-19 pandemic adversely affected the company's business, financial condition, and results of operations.

According to the travel tech's prospectus, disruptions in the operations of the firm's customers and prospective customers, including as a result of travel restrictions and business shutdowns, uncertainty in the financial markets or other harm to their business and financial performance, leading to reduction in information technology budgets, delayed purchasing decisions, longer sales cycles, extended payment terms, the timing of payments, ability to pay for services and solutions on time or at all and postponed or cancelled projects, all of these have negatively impacted the company's business and operating results, including sales and cash flows.

For more details, check out RateGain Travel Technologies' Red Herring Prospectus.

Competitive strengths

• Strong customer base with 1,434 customers including 8 Global Fortune 500 Companies as of 30 June 2021.
• Innovative AI-driven industry-relevant SaaS solution provider.
• Comprehensive product portfolio solutions for the travel and hospitality industry.
• Strong financial performance with an established track record of successful acceleration post-acquisition.
• Diversified management team with domain expertise.

RateGain Travel Technologies IPO risk

• The Covid-19 pandemic had a substantial negative impact on their company and operating performance, and its future impact is unknown.
• The activities of a small number of marketplaces account for a substantial percentage of their revenue.
• They may not realise the expected advantages from their strategic investments and acquisitions, and they may fail to pursue future investments and acquisitions.
• They may face new problems and dangers when they expand into new business sectors or product lines.
• They have a history of net losses and they expect their costs to rise in the future.
• Failure to deliver excellent customer service and assistance may have a negative impact on their existing client relationships.
• Exchange rate changes may negatively affect their results of operations.
• Failure to defend their intellectual property rights may have a negative impact on their business and brand.

Tourism may go off the recovery track as travel firms brace for Omicron impact

The spread of the new variant of Covid-19 virus could stall the recovery of the tourism sector.

The world health organisation (WHO) has termed the Omicron mutation, first detected in South Africa, as 'variant of concern' that poses very high global risk.

Many players in the travel sector are worried about cancellations in the coming days as countries tighten travel restrictions.

This may adversely affect the business operations of RateGain Travel Technologies and its customers in the coming months.

The Indian tourism industry, which is hoping for a revival after being badly hit for almost two years, is on a wait-and-watch mode on the impact the new Covid variant Omicron might have on the sector.

IPO market is booming in India. Will the trend continue?

Following the recent market correction, market participants should keep an eye on the Indian and global markets as new corona variant has hit global bourses very badly.

This could affect the primary market as well.

However, given the abundant liquidity and the market regulator easing listing procedures, the IPO craze is understandable.

Data suggests that companies raised funds to the tune of US$4.6 bn from IPOs last year. The market believes this amount will be easily surpassed in 2021.

As companies line up to raise funds from the market amid high valuations, investors need to consider many factors before investing their money in an IPO.

If you are investing in an IPO, weigh in all the positive and negative factors affecting the company.

Take a close look at the company's financials and valuations. It would give you a clear picture of what's brewing.

Happy Investing!

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