The travel industry software provider RateGain is set to hit the markets with its ₹1,336 crore IPO. After a profitable FY19, it suffered losses in the last two fiscals due to pandemic-related sluggishness in the tourism sector. However, the third-party travel technology space is estimated to grow at 18% CAGR till 2025. RateGain, with its long standing client relationship and advanced AI-based products, stands to gain from this trend. The company has also won the ‘Most Innovative Startup’ award at the Economic Times Innovation Awards in 2020.
Offer details
- Start date: 7 December 2021
- End date: 9 December 2021
- Price band: ₹405–₹425 per share
- Minimum investment: ₹14,875
- IPO size: ₹1,336 crore
All about the IPO
Bhanu Chopra, the founder of RateGain, was a frequent traveller. He would go to different websites and do price comparisons. Inspired by his own experience, Chopra started RateGain in 2004 but with a little twist. His company provided hotels with their competitors’ pricing. Cut to 2021, it has evolved into India’s largest Software as a Service (SaaS) company in the travel and hospitality industry.
The company has three business verticals - Data as a Service(DaaS), Distribution and Marketing technology. Across these verticals, it serves 1,462 customers across the world.
Business highlights
- Offers travel and hospitality solutions across a wide spectrum of verticals - from hotels and airlines to even cruises.
- Business classified into three strategic units - Data as a Service(DaaS), Distribution and Marketing technology.
- Has 1,462 customers including eight Global Fortune 500 companies, Lemon Tree Hotels and Oyo Hotels.
Financials
Revenue: -2.12%; Net profit: NA (FY19-21 CAGR)
The business performance was adversely impacted due to the pandemic.
Strengths
- Being one of the largest aggregators of industry data points, it has the competitive advantage of providing AI-based solutions
- High customer stickiness with seven of the top 10 customers associated with it for over 10 years
- Revenue diversification with a comprehensive portfolio of interconnected products
Risks
- The new virus variant has once again created uncertainty for the travel and hospitality industry
- Nearly 99% of revenues are derived from outside India and it exposes the company to currency and geo-political risks
- Doesn’t have a consistent track record of profitability and has suffered losses in FY20 and FY21
Good to know
The demand for third party software has risen during the pandemic as companies are reducing in-house IT staff. In fact, the third party travel and hospitality technology space is estimated to grow at a CAGR of 18% to $11.5 by 2025. Another tailwind for the company is that its marketing technology segment is quickly emerging as a strong revenue contributor with high social media adoption by the client hotels.