Ixigo IPO opens for subscription: Check offer size, strengths, weaknesses & more

Le Travenues Technology Ltd, the parent company of online travel portal Ixigo, on Monday launched its initial public offer to raise around ₹740.1 crore from public investors.

The book building public offer comprises a fresh issue of 1.29 crore shares worth ₹120 crore and an Offer-For-Sale (OFS) component of 6.67 crore shares worth ₹620.1 crore.

Ixigo founders Rajnish Kumar and Aloke Bajpai, and key investors such as SAIF Partners India and Peak XV Partners are divesting shares through the OFS route.

The Ixigo IPO price band has been fixed at ₹88-93 per equity share. The issue closes for bidding on June 12.

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Ixigo is a technology company which facilitates travellers to plan, book and manage their trips across air, buses, rail, and hotels. The company looks to become the most customer-centric travel company and provide the best customer experience to users.

The company’s OTA (Over the Air) platforms help Indian travellers book flight tickets, bus tickets, rail tickets and hotels. The OTA platforms also offer travel utility tools and services such as train PNR status and confirmation predictions, train running status updates and train seat availability alerts.

The OTA platforms help in alternative route or mode planning, flight status updates, automated web check-in, bus running status, pricing and availability alerts, deal discovery, instant fare alerts for flights, AI-based travel itinerary planner and automated customer support services.

Here are the key strengths and weaknesses of Ixigo

Scope for expansion

Ixigo holds a huge potential for business improvement on industry tailwinds, internet penetration, business scalability and high brand recall. Growing demand for travel services in Tier II and III cities also bolsters the company’s expansion plans.

Indian travel and tourism spending was ₹16.5 lakh crore in FY2023 with an equally high contribution to GDP at 9.7% as of 2023. The contribution is expected to grow strongly in the future.

Government policies

The government has taken a number of initiatives to promote the growth of the travel sector. Schemes such as the UDAN scheme to improve the connectivity to rural and underserved regions of India and development of airport infrastructure and air connectivity are expected to boost demand for travel services.

Other initiatives such as Swadeh Darshan and Pilgrimage Rejuvenation and Spiritual Heritage Augmentation Drive (PRASAD Scheme) and enhancement of tourism infrastructure are positive factors for travel services providers like Ixigo.

Internet Penetration and next billion users (NBU) Increasing Internet penetration has a multiplier effect on economic growth, industry and corporate demand in the country. Next Billion Internet Users (NBU) will determine the direction of consumption in many internet-based industries like travel. New to Internet users in all Tier II, III and rural areas in India as well as from middle and lower income groups of Tier I cities are expected to boost demand for the travel industry.

Attractive valuations

Ixigo reported a profit before tax of ₹485.03 million in the nine months ended December 31, 2023 against and ₹144.02 million in December 31, 2022. Revenue from operations rose by 31% year-on-year to ₹497 crore in nine months ended December 2023. Its restated profit before tax was ₹ 206.74 million in Fiscal 2023.

Experts say that at the upper band, Ixigo is valued at P/E of 154x against 192x for Yatra Online.

Weaknesses

Low market share

Ixigo started operations as a meta search website and subsequently transitioned to become an OTA. It has limited experience of operating as an OTA. Its market share of the overall OTA market by GTV was 6.52% in the nine months ended December 31, 2023.

Dependence on IRCTC

Ixigo’s train ticketing services depend on its agreement with IRCTC. The termination of the agreement could preclude it from undertaking our train ticketing services and could otherwise have a material adverse effect on the results of operations, cash flows, financial condition and business prospects.

Also, its arrangement with IRCTC is on a non-exclusive basis and IRCTC may engage with other distribution partners including our competitors.

Change in internet behaviour

The future success will depend on the company’s ability to adapt OTA platforms, products and services to the changes in technologies and internet user behaviour. It is dependent on the interoperability of our services with popular mobile devices and mobile operating systems that we do not control. Any changes in such mobile operating systems can impact its business.

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